Canada’s employment market experienced a setback in August, shedding 42,000 jobs, according to Statistics Canada. This unexpected decline contrasted with economists’ predictions of a fourth consecutive month of job gains since May. The unemployment rate remained unchanged at 6.4 percent for the month.
The latest Labour Force Survey revealed a decrease of 20,000 public sector positions, marking a third consecutive monthly decline, while private sector employment remained relatively stable. In a positive turn, the manufacturing industry saw an increase of 22,000 jobs in August, although sectors such as public administration, natural resources, and utilities reported declines.
CIBC’s chief economist, Andrew Grantham, noted that manufacturing was the sole sector to register a significant rise in employment during August. This aligns with other indicators, such as exports and monthly GDP, suggesting a slowdown in the economy in the third quarter following a robust second quarter, amidst heightened uncertainty regarding U.S. trade.
Quebec was the most affected province, losing 19,000 jobs, followed by Ontario with an 18,000 job loss. The Bank of Montreal’s chief economist, Douglas Porter, commented that after a series of strong job reports, Canada was overdue for a reality check. While the latest report indicates a softening in the job market, it was not entirely surprising.
Statistics Canada reported that average hourly wage growth in August hit its slowest pace in nearly nine years, dropping to two percent on an annualized basis from 2.8 percent in July and 3.3 percent in June. Economists in a Reuters poll had anticipated a job increase of 15,000 in August, with an expected unemployment rate of 6.4 percent, as per LSEG Data & Analytics.
This data ends a streak of monthly employment gains, with the Canadian economy adding 75,000 jobs in July and a total of 181,000 jobs from April to July. The report arrives amidst escalating trade tensions between Canada and the U.S., with recent tariff actions affecting various industries.
Last week, the Canadian government announced a $7.5 billion expanded economic relief program to support affected workers and businesses, in addition to the $25 billion in tariff support provided over the past 18 months. Industries reliant on U.S. exports continue to face uncertainty, with layoff rates higher than other sectors over the past year.
Scotiabank economist Mitch Villeneuve highlighted a gradual decline in the share of Canadian exports bound for the U.S., emphasizing faster growth in exports to non-U.S. markets, particularly Europe. While Bank of Canada Governor Tiff Macklem acknowledged the impact of recent U.S. tariffs, he noted that they apply to a limited range of products.
In contrast to Canada, the U.S. labor market saw positive growth in August, with American employers adding 162,000 jobs, according to the U.S. Labor Department. The unemployment rate in the U.S. remained steady at 4.1 percent for the month, with President Trump lauding the job numbers on social media.
Trump’s comments hinted at the possibility of the Federal Reserve lowering interest rates further, emphasizing the importance of trade imbalances. In Canada, many economists anticipate the central bank maintaining its policy rate at 2.25 percent through the remainder of the year.