Canada’s job market experienced a setback in August, shedding 42,000 jobs, according to Statistics Canada. This decline was unexpected, as many economists had anticipated a fourth consecutive month of job growth since May. The unemployment rate remained unchanged at 6.4 percent during the same period.
The latest Labour Force Survey revealed a decrease of 20,000 public sector jobs, marking the third consecutive monthly decline, while private sector employment remained relatively stable. Notably, the manufacturing industry saw a positive trend by adding 22,000 jobs in August, while sectors such as public administration, natural resources, and utilities reported declines.
CIBC chief economist Andrew Grantham pointed out that manufacturing was the sole sector to exhibit a significant increase in employment for the month. This trend aligns with other indicators, such as exports and monthly GDP, suggesting a slowdown in the economy for the third quarter following a robust second quarter, amidst heightened uncertainty surrounding U.S. trade relations.
Quebec suffered the most significant job losses, shedding 19,000 jobs, followed by Ontario with an 18,000 job decrease. Bank of Montreal chief economist Douglas Porter noted that after a series of strong job reports, it was anticipated that Canada would face a reality check soon. Despite being a soft report, it was not entirely surprising.
Statistics Canada reported that the average hourly wage growth in August was the slowest in almost nine years, with a slowdown to two percent on an annual basis from 2.8 percent in July and 3.3 percent in June. Prior to this, a Reuters poll had forecasted a job gain of 15,000 positions in August, with an expected unchanged unemployment rate of 6.4 percent.
The recent job data marked a departure from previous months where the Canadian economy added 75,000 jobs in July and a total of 181,000 jobs from April to July. The release of this report coincides with escalating trade tensions between Canada and the U.S., with both countries imposing significant tariffs on each other’s products.
Last week, the Canadian government introduced a $7.5 billion expanded economic relief program to support affected workers and businesses, in addition to the previously implemented $25 billion in tariff support over the past 18 months. Industries reliant on U.S. demand for exports continue to face uncertainty, with layoff rates higher compared to other sectors over the past year.
Scotiabank economist Mitch Villeneuve highlighted a gradual decline in the share of Canadian exports destined for the U.S., emphasizing faster growth in exports to non-U.S. markets, particularly Europe. Meanwhile, Bank of Canada Governor Tiff Macklem acknowledged the impact of U.S. tariffs but noted their narrow scope on goods.
In contrast, the U.S. labor market showed resilience in August, with American employers adding 162,000 jobs as reported by the U.S. Labor Department. Furthermore, the revision of June and July payroll figures added a combined 55,000 jobs, while the U.S. unemployment rate remained stable at 4.1 percent.
President Trump hailed the U.S. job numbers on social media and urged the Federal Reserve to lower interest rates, threatening trade actions if his demands were not met. While the U.S. economy showed strength, many economists in Canada foresee the central bank maintaining its policy rate at 2.25 percent for the remainder of the year.