Canada lost 68,300 jobs in September, the second consecutive monthly decline amid two glaring risks: the trade war with the United States and sustained high oil prices because of the Iran war.
The Bank of Canada is likely to hold its policy rate at 2.25 per cent in October given September’s weak jobs report and core inflation remaining near target.
But a 25 basis-point rate hike could come as early as December rather than in January if oil prices stay elevated and inflation broadens beyond energy.
A 6.5 per cent unemployment rate in and of itself is not alarming and is relatively low by historical standards. The labour market was strong earlier this year, and two weak months do not erase the gains over the past year. Still, Canada lost 110,000 jobs in August and September combined.
New U.S. tariffs took effect in September, and businesses are only beginning to respond. Trade talks remain frozen with the chance of further escalation. More layoffs are on the horizon as businesses contend with tariff rates as high as 25 per cent or 50 per cent, making production in Canada to export to the U.S. impractical.
The unemployment rate edged up 0.1 percentage points to 6.5 per cent.
Job losses have been concentrated in the public sector, especially education, which lost 35,300 jobs in September. Healthcare and social assistance lost 23,100 jobs.
Unsurprisingly, manufacturing lost 12,700 jobs as the tariffs hit.
The outlier was in professional, scientific and technical services, which added 10,600 jobs. Before September, businesses had held onto their workers. But layoffs have started and could continue with Section 338 and other US tariffs.
Then there is the sharp provincial divide, perfectly matched up to the dual risks of the trade war and oil prices.
Quebec led the decline with 49,000 jobs lost, followed by Ontario and British Columbia at 20,000 jobs each. This is unsurprising as these are the three provinces most exposed to American tariffs.
In contrast, Alberta bucked the trend by adding 23,000 jobs, benefiting from the energy and commodity boom.
The economy lost 35,000 full-time jobs and 33,000 part-time jobs.
Youth employment dropped by 48,000 positions, but that could largely be a seasonal effect of school starting in September rather than a structural change.
The labour force participation rate fell to 64.8 per cent, its lowest level since 1997 outside the pandemic, largely because of population aging.
Immigration has slowed to a trickle compared to the pandemic era, which means that labour force growth and the participation rate would also stall in the coming months.
