Canadian Employment Retreats in August, Though Jobless Rate Holds Steady — 2nd Update

By Robb M. Stewart

OTTAWA--Canada's job market stalled last month, giving back some of the recent job gains but holding the unemployment rate steady at a two-year low ahead of what could be a rocky patch as trade tensions reignite uncertainty.

Employers in the country cut a net 41,700 jobs in August, surrendering some of the more than 180,000 jobs added to the economy over the prior three months, Statistics Canada said Friday.

Yet with the labor force contracting slightly and the job-market participation rate dipping slightly, the unemployment rate held at 6.4% after having fallen half a percentage point from the recent 6.9% high in April. When calculated using U.S. Labor Department methodology, Canada's unemployment rate was unchanged for a third straight month at 5.3%.

Weak job numbers for August are in keeping with other indicators that point to a soft start to the third quarter for Canada's economy, following strong growth in the April-to-June stretch that was buoyed in part by resilient household spending and a recovery in business investment. Statistics Canada's labor force survey reflects data collected just ahead of the collapse in trade talks between Washington and Ottawa, as well as a fresh round of tariffs and countermeasures that the central bank has warned could lead businesses to delay investment and hiring decisions.

Job losses in August were largely in full-time positions and concentrated among core-age men, and split fairly evenly between public- and private-sector employers. The retreat in employment was broad across industries, with manufacturing being the only sector to record any significant rise in employment for the month.

At the same time, wage growth cooled to the slowest pace outside of the peak pandemic years since late 2017, with average hourly wages rising 2% from a year earlier, undershooting consumer price inflation that has accelerated to 3%.

"Given the prior run of strong readings and the stable unemployment rate, the Bank of Canada won't be too worried about this report. That said, the rise in trade tensions between Canada and the U.S. has opened up the possibility of another wave of layoffs in trade-exposed sectors," said Royce Mendes, head of macroeconomic strategy at Desjardins.

The consensus forecast among economists had been for a modest 15,000 rise in employment and an unchanged unemployment rate.

On a three-month basis, average monthly employment gains are running at just under 20,000, which economists estimate is enough to keep the jobless rate steady given a flattening of the working-age population. Compared with a year earlier, employment in August remained up 216,500.

Thomas Ryan, senior North America economist at research firm Capital Economics, said the magnitude of last month's retreat in employment isn't as bad as it looks. A stronger job market for young workers this summer was partly reversed in August, and job losses in the services sectors may also reflect some pullback following a boost from the soccer World Cup as well as the reversal of earlier strength in youth hiring, he said.

Although job numbers fell, Canada hasn't seen a broad rise in layoffs. The layoff rate in the country stood at 0.8%, slightly below the 1% recorded a year earlier but similar to the pre-pandemic period from 2017 to 2019.

As well, among the roughly 1.5 million people without a job last month, 24% were in long-term unemployment, meaning they had been continuously searching for work for 27 weeks or more. That is a similar proportion to a year ago, though above the roughly 17% average before the pandemic.

"We expect the economy will continue struggling to create jobs in the near term as mounting headwinds from new U.S.-Canada tariffs, greater uncertainty from a flare up in the trade war and the ongoing Iran conflict and a shrinking population weigh on hiring," said Tony Stillo, director of Canada economics at Oxford Economics, who expects the Bank of Canada to sit tight into next year after having already left interest rates unchanged seven times in a row.

Write to Robb M. Stewart robb.stewart@wsj.com

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September 04, 2026 11:17 ET (15:17 GMT)