Canada’s job market faced a setback in August, shedding 42,000 positions, according to Statistics Canada’s report on Friday. This decline caught some analysts off guard as they had anticipated a fourth consecutive monthly increase since May.
The unemployment rate remained unchanged at 6.4% last month, as reported by the agency.
The most recent Labour Force Survey revealed a drop of 20,000 public sector jobs for the third month in a row, while there was minimal change in private sector employment. Notably, the manufacturing sector stood out by adding 22,000 jobs during August, while areas such as public administration, natural resources, and utilities experienced declines.
CIBC’s chief economist, Andrew Grantham, noted that manufacturing was the sole sector to see a significant rise in employment in August. He also highlighted that various indicators, including exports and monthly GDP, suggest that the economy might be slowing down in the third quarter after a robust second quarter, amid increased uncertainty surrounding U.S. trade relations.
Quebec and Ontario were the most affected regions, losing 19,000 and 18,000 jobs, respectively. Bank of Montreal’s chief economist, Douglas Porter, noted that following a series of positive job reports, it was expected that Canada would face a reality check soon. He mentioned that while the latest report is disappointing, it was not entirely unexpected.
Statistics Canada reported that the average hourly wage growth in August hit its slowest pace in nearly nine years, dropping to two percent annually from 2.8% in July and 3.3% in June.
A Reuters poll had projected a gain of 15,000 jobs in August, with the unemployment rate remaining at 6.4%, as per LSEG Data & Analytics. This data marks the end of a streak of monthly job increases, with the Canadian economy adding 75,000 jobs in July, and a total of 181,000 jobs from April to July.
These job market fluctuations occur amidst ongoing trade tensions between Canada and the United States. The recent imposition of tariffs by the U.S. and Canada has put pressure on various industries. The Canadian government introduced a $7.5 billion economic relief program for affected workers and businesses, in addition to the previous $25 billion in tariff support over the past year and a half.
Industries reliant on U.S. export demand continue to face economic uncertainty, with higher layoff rates compared to other sectors over the past year. Export trends show a gradual decline in the share of Canadian exports heading to the U.S., highlighting a shift towards non-U.S. markets, particularly Europe.
In contrast, the U.S. labor market saw positive growth in August, with employers adding 162,000 jobs. The unemployment rate in the U.S. remained steady at 4.1%. President Trump praised the job numbers on social media, urging the Federal Reserve to lower interest rates and threatening trading consequences for countries with trade deficits with the U.S.
While the U.S. job market flourished, many Canadian economists expect the Bank of Canada to maintain its policy rate at 2.25% for the rest of the year.