Canada experienced a setback in its labor market during August, shedding 42,000 jobs, according to Statistics Canada’s report released on Friday. This decline caught some economists off guard as they had anticipated a fourth consecutive month of job gains since May. Despite the job losses, the unemployment rate remained unchanged at 6.4 percent for the month.
The latest Labour Force Survey revealed a decrease of 20,000 public sector workers, marking the third consecutive month of decline in this sector. Conversely, job numbers in the private sector remained relatively stable. Notably, the manufacturing industry stood out by adding 22,000 jobs in August, while sectors such as public administration, natural resources, and utilities experienced declines.
CIBC’s chief economist, Andrew Grantham, highlighted the significance of the manufacturing sector’s job growth in August, as it was the only sector to show a notable increase. This trend aligns with other economic indicators, such as exports and monthly GDP, suggesting a slowdown in the economy during the third quarter following a robust second quarter, amidst uncertainties surrounding U.S. trade policies.
Quebec bore the brunt of job losses, shedding 19,000 positions, followed by Ontario with an 18,000 job decrease. Bank of Montreal’s chief economist, Douglas Porter, acknowledged the softness of the report, noting that after a series of positive job results, a correction was expected.
Average hourly wage growth in August hit a nearly nine-year low, with a 2 percent increase on an annual basis, down from 2.8 percent in July and 3.3 percent in June. This slowdown in wage growth added to the economic concerns raised by the job market report.
The data diverged from economist expectations, with a Reuters poll forecasting a job increase of 15,000 in August and an unchanged unemployment rate of 6.4 percent. The recent decline breaks a streak of monthly gains, with the Canadian economy adding 75,000 jobs in July and a total of 181,000 jobs from April to July.
The challenging labor market conditions coincide with ongoing trade tensions between Canada and the U.S., with recent tariff impositions affecting various industries. In response, the Canadian government introduced a $7.5-billion expanded economic relief program to support affected workers and businesses, in addition to previous tariff support initiatives totaling nearly $25 billion.
Statistics Canada emphasized the uncertain economic environment for industries heavily reliant on U.S. export demand, noting higher layoff rates in these sectors over the past year. The agency highlighted a gradual shift in export destinations away from the U.S., with increased growth in exports to non-U.S. markets, especially Europe.
Meanwhile, the U.S. labor market showed resilience in August, with the Labor Department reporting the addition of 162,000 jobs and revising June and July payroll figures upward by a combined 55,000 jobs. President Trump lauded the U.S. job numbers on social media, advocating for a Federal Reserve interest rate cut and issuing trade-related threats to countries with trade deficits with the U.S.
Despite the contrasting job market performances between Canada and the U.S., many economists anticipate the Bank of Canada to maintain its policy rate at 2.25 percent throughout the remainder of the year.
