Canada's labor market hit the brakes in August, giving back 41,700 jobs after a run of gains. The unemployment rate held at 6.4%, the same level it fell to in July, which was the lowest in two years. Losses were centered in Ontario and Quebec and spanned several service industries. Finance, insurance and real estate dropped almost 10,000 roles, with additional declines across retail, wholesale and hospitality.
Governments kept trimming headcount for a third straight month, with public sector employment down 20,000 in August and lower by 78,000 since May. Looking through the monthly noise, total employment is still 217,000 higher than a year earlier, helped by a burst of 181,000 jobs added from late April through the end of July.
Factories were the standout, adding 22,100 jobs in August, mostly in Ontario. Pay growth cooled, though. Hourly earnings for full time permanent workers rose 2% from a year earlier, slower than July's 3% pace and shy of the 2.9% economists were looking for.
The mix in unemployment shifted too. The rate for men ages 25 to 54 ticked up to 6% from 5.8% as more in that group entered the job hunt. Students heading back to class came off a stronger summer, with their average unemployment rate between May and August down by roughly two percentage points compared with the same period a year earlier.
Forecasters surveyed by Bloomberg had expected a gain of 15,000 jobs with the jobless rate unchanged. Instead, the weaker print lifted two-year Canada bond prices, putting the yield at 3.114% at 8:44 a.m. in Ottawa. That came after those bonds had fallen earlier in the week following hawkish remarks from the Bank of Canada governor. The Canadian dollar slid hard against the U.S. dollar, which drew support from a stronger U.S. payrolls print showing nonfarm jobs up 162,000, beating every economist's call.
"Today's print seems to tally with other evidence (exports, monthly GDP) that the economy is slowing again," wrote Andrew Grantham of Canadian Imperial Bank of Commerce. He added that with U.S. trade risks elevated, he expects the Bank of Canada to stay on hold even after policymakers flagged greater inflation concerns this week. Dominique Lapointe, Manulife Investment Management's senior director for macro strategy, put it bluntly: if the goal was to hint at imminent hikes, these figures make that look premature. Governor Tiff Macklem said Canada entered the latest trade fight on firmer footing, but that "uncertainty about the sustainability of the rebound has increased." He noted the overall economy should absorb the new levies, though pain would be concentrated in certain industries.
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The broader backdrop still shows momentum. Real GDP grew at a 3.3% annualized clip in the second quarter, and the jobless rate's July dip to 6.4% capped a rebound from a yearlong slump tied to U.S. tariffs and slower immigration. But the recovery faces a new test.
On Aug. 21, the U.S. imposed 50% duties on $20 billion of Canadian goods, and Canada's countermeasures are scheduled to start next week. Stress is already visible where exposure to American demand runs highest: over the past 12 months, industries tied to U.S.-bound exports saw an average layoff rate of 0.9%, versus 0.7% elsewhere.
Bottom line for your wallet: the jobs engine is still running year over year, but monthly losses, cooler wage growth and fresh trade frictions are pulling in the other direction. Markets are reacting in real time to that push and pull, which means policy signals and trade headlines could matter as much as the next jobs print.
