Canada’s Unemployment Rate Holds Steady, Despite August Job Losses  

• Canada’s economy lost 42k jobs in August (-0.2% m/m), well below consensus expectations for a 15k gain. The decline was concentrated in full-time work, which fell by 36k, while private-sector employment decreased by 23k.
• The unemployment rate was unchanged at 6.4% (in line with consensus), holding at its lowest level since 2024 after three consecutive monthly declines. The labour force declined by 37k, pushing the labour force participation rate down 0.1 percentage points to 65.0%.
• Employment losses were concentrated in business, building and other support services (-20k), public administration (-9k), natural resources (-8k) and utilities (-6k). Offsetting this, manufacturing posted a 22k gain, the largest increase among industries and the only statistically significant sectoral gain in the month.
• Average hourly wages rose 2.0% y/y in August, slowing further from 2.8% y/y in July and 3.3% y/y in June, marking a second consecutive month of deceleration in wage growth. Excluding 2021, August wage growth was the slowest since November 2017.

Key Implications

• After a string of solid labour market reports August showed some give-back. Although disappointing, given the noisy nature of the data a step backwards is not a major surprise after a string of hot reports. The important thing to take away here is that the unemployment rate remained unchanged on the month and is still 0.7 percentage points below last year’s print.
• The labour market has made material improvements over the past year. Unfortunately, trade uncertainty is the focus as new U.S. tariffs took effect late last month and Canada’s counter-tariffs are set to go into effect next week. The prospect of further escalation is hard to dismiss and firmly represents downside risk to the outlook. For the time being, a 6.4% unemployment rate reflects excess supply in the labour market, and we continue to expect the Bank of Canada to remain on hold.