Canada loses 41,700 jobs as summer hiring fades; unemployment rate holds steady

Canada's economy shed 41,700 jobs in August, marking a sharp slowdown from the strong hiring seen earlier in the summer, according to data released on Friday. The unemployment rate remained unchanged at 6.4%. This report, being the final labor force survey before the impact of US President Donald Trump's new 50% tariffs take effect, hints at potential job losses in vulnerable industries such as wood products.

Desjardins head of macro strategy Royce Mendes cautioned that trade tensions between Canada and the US could lead to more layoffs in trade-exposed sectors. Analysts had predicted an increase of about 15,000 jobs, following a surge of 75,100 positions in July. The Canadian dollar dipped slightly against the US dollar, falling 0.51% to C$1.3860.

Meanwhile, yields on 2-year government bonds rose after the labor data, increasing 1.3 basis points to 2.469%. The majority of job losses were in full-time employment, with 35,900 positions disappearing, while part-time employment also fell by 5,800 jobs. Most of the decline occurred in service industries, including healthcare, education, transportation, and financing, which laid off 51,500 workers.

Youth unemployment increased slightly to 12.9%, after a downward trend from April to July. The labor force itself shrank for the first time since February, with 22.63 million Canadians now employed. Wage growth for permanent employees slowed to 2% in August, the lowest level in nearly eight years outside of the pandemic. These developments cast doubt on the notion that the Canadian economy has made a decisive recovery.