Canada’s labor market took a clear step down in August, the country shed 66,000 jobs, a 0.3% monthly decline, and the unemployment rate rose to 7.1%, according to Statistics Canada’s Labour Force Survey.
The employment rate slipped to 60.5%, extending a slide that has run through most of this year.
The report reinforced confidence in markets that easier policy is on the table as growth softens and hiring momentum fades. Statistics Canada’s release showed the damage was concentrated in part-time work.
Professional, scientific and technical services, transportation and warehousing, and manufacturing each posted meaningful losses, while construction added workers and goods-producing industries held steadier.
Ontario, British Columbia, and Alberta recorded the largest provincial declines.
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Average hourly wages among employees rose 3.2% year over year to 36.31 Canadian dollars, a slower pace than earlier in the cycle and one that points to moderating pay pressures even as joblessness climbs.
A softer labor backdrop typically loosens the Bank of Canada’s grip on policy, especially when wage gains are cooling and hours worked have flattened out.
The central bank’s framework remains anchored to inflation control, and officials have repeatedly said the Bank of Canada is committed to a 2% inflation goal.
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August’s data strengthened the case that restrictive settings are biting, setting up a clearer runway for easing if inflation continues to drift toward target.
Markets responded in kind when the report hit, government bond yields fell as traders marked up the odds of a near-term rate cut, while the Canadian dollar lagged peers on the day as growth expectations eased.
Equity sentiment has been more nuanced; hopes for lower borrowing costs supported risk appetite at times in September, even as investors stayed sensitive to incoming inflation readings and global growth signals.
In that stretch, the TSX stalled near a record as traders waited for U.S. inflation clues, underscoring how closely Canada’s market narrative now tracks policy expectations on both sides of the border.
The composition of losses matters for the path ahead, August’s drop was driven largely by part-time positions, with self-employment also down. That mix can amplify swings month to month, but it still points to softer demand for labor.
The employment rate has declined 0.6 percentage point since January, a reminder that population gains are outpacing job creation and that a higher share of Canadians is on the sidelines.
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The number of unemployed people rose to roughly 1.6 million, and the share of job seekers finding work between July and August fell below pre-pandemic norms, a sign of tougher search conditions.
Policy makers will weigh these labor signals against financing conditions that have tightened over the past year. Episodes such as recent repo market strains in Canada illustrate how liquidity stresses can flare as central banks withdraw support.
If growth headwinds persist and wage growth stays contained, the bar for an initial or additional cut lowers, even if officials remain alert to sticky components of inflation like shelter.
One wrinkle arrived with the September jobs report, which showed a rebound in hiring and an unemployment rate unchanged at 7.1%.
The snap-back tempered expectations for an October move and kept attention fixed on upcoming inflation and wages. It does not erase the August signal, though.
Two consecutive months of net declines through July and August, followed by a partial recovery, still describe a market that has lost momentum compared with earlier in the year.
Borrowing costs are still high by recent standards, but the window for relief appears closer than it did this summer.
If inflation continues to cool and job gains remain uneven, August may be remembered as the print that turned rate speculation into a base case.
