Canada experienced a setback in its labor market in August, shedding 42,000 jobs, according to Statistics Canada. This decline came as a surprise to some analysts who had anticipated a fourth consecutive month of job gains since May. Despite the job losses, the unemployment rate remained steady at 6.4 percent for the month.
The latest Labour Force Survey revealed a drop of 20,000 public sector jobs, marking the third consecutive monthly decline in this sector. Meanwhile, the private sector saw minimal changes in job numbers. The manufacturing industry stood out in August by adding 22,000 jobs, although sectors like public administration, natural resources, and utilities experienced declines.
CIBC’s chief economist, Andrew Grantham, noted that manufacturing was the only sector with a significant increase in employment during August. This aligns with the overall economic slowdown in the third quarter following a robust second quarter, amid increased uncertainty surrounding U.S. trade relations.
Quebec suffered the most with a loss of 19,000 jobs, followed by Ontario with an 18,000 job decrease. Bank of Montreal’s chief economist, Douglas Porter, acknowledged the softness of the report but highlighted that it was not entirely unexpected given the previous strong job results.
Average hourly wage growth in August hit a nearly nine-year low, slowing to two percent on an annualized basis from 2.8 percent in July and 3.3 percent in June. Economists had predicted a gain of 15,000 jobs in August, with the unemployment rate expected to remain at 6.4 percent.
The recent job data contrasts with previous months where Canada added 75,000 jobs in July and a total of 181,000 jobs from April to July. The ongoing trade tensions between Canada and the U.S., marked by reciprocal tariffs, have put pressure on various industries. In response, the Canadian government introduced a $7.5 billion economic relief program for affected workers and businesses.
Industries reliant on U.S. export demand continue to face economic uncertainty, as noted by Statistics Canada. The agency highlighted higher layoff rates in these sectors over the past year leading up to August. Additionally, there has been a gradual decrease in the share of Canadian exports destined for the U.S., with a shift towards non-U.S. markets, particularly Europe.
In contrast, the U.S. labor market saw a positive trend in August, with American employers adding 162,000 jobs. The unemployment rate in the U.S. remained steady at 4.1 percent. President Donald Trump praised the job numbers, emphasizing the need for the Federal Reserve to lower interest rates to maintain economic growth.
While the U.S. job market showed strength, many Canadian economists anticipate the Bank of Canada to maintain its policy rate at 2.25 percent for the remainder of the year.