Employment declined by 68,000 (-0.3%) in September and the employment rate fell 0.2 percentage points to 60.6%. The unemployment rate increased 0.1 percentage points to 6.5%. The employment decline was concentrated among youth aged 15 to 24 (-48,000; -1.8%) as well as women aged 25 to 54 (-28,000; -0.4%), reported Statistics Canada on Friday.
There were fewer people working in educational services (-35,000; -2.2%), health care and social assistance (-23,000; -0.8%) as well as manufacturing (-13,000; -0.7%). There were more people working in ‘other services’ (+17,000; +2.1%), which includes repair and maintenance as well as personal or household services, said the federal agency.
The wholesale and retail trade sector lost 9,600 positions while accommodation and food services grew by 1,000.
“In September, employment declined by 68,000 (-0.3%), split between full-time work (-35,000; -0.2%) and part-time work (-33,000; -0.9%). The employment decline in September follows a decrease in August (-42,000; -0.2%),” it said.
Prior to these two consecutive monthly declines, employment had trended up from April to July (+181,000; +0.9%). On a year-over-year basis, employment was up by 95,000 (+0.5%) in September.
“The employment rate—the proportion of the population aged 15 and older who are employed—decreased by 0.2 percentage points to 60.6% in September, marking a second consecutive monthly decrease. On a year-over-year basis, the employment rate in September was unchanged.”
Earlier in the year, the unemployment rate reached a recent peak of 6.9% in April, before declining to 6.4% in July and August. The unemployment rate in September was the same as it was at the start of the year (6.5% in January), noted Statistics Canada.
“The layoff rate—representing the proportion of people who were employed in August but had become unemployed in September as a result of a layoff—was 0.7%, similar to the rate observed a year earlier (0.6%) and the average during the period from 2017 to 2019 (0.6%) (not seasonally adjusted). The job-finding rate was 30.6% in September, down from 32.8% 12 months earlier and below the average of 36.5% during the period from 2017 to 2019. This refers to the proportion of people who were unemployed in August and had found a job in September,” it said.
“The labour force participation rate—the proportion of the population aged 15 and older who were employed or looking for work—fell 0.2 percentage points to 64.8% in September. This was the lowest level since December 1997 (when it was also 64.8%), excluding 2020 during the COVID-19 pandemic. On a year-over-year basis, the participation rate was down 0.4 percentage points in September 2026, largely the result of population aging.”
Analyst thoughts on the numbers
Andrew Grantham, Senior Economist, CIBC Capital Markets, said: “Canadian employment slumped again in September, with the unemployment rate ticking up slightly as new US tariffs took hold. The 68K decline in employment was in stark contrast to consensus expectations for a modest 10K rebound, and followed a 42K drop in the prior month as well. Data volatility appears to have been the main cause of the decline, with a 35K reduction seen in education services which often exhibits volatility around the start of new school years. However, the 13K decline in manufacturing employment could be a sign that new US tariffs are taking a toll. Through the monthly volatility, the 6-month average employment growth now sits at just 9K. The unemployment rate ticked up to 6.5%, which was in line with the consensus forecast and was prevented from rising further by a reduction in the participation rate. Wage growth for permanent employees remained only modest at 2.3%, despite accelerating slightly from 2.0% in the prior month. Overall, while the weakness in today’s employment data is likely more a reflection of data volatility than the impact of new US tariffs, it does support our call that the Bank of Canada will remain patient and keep interest rates on hold at the two remaining meetings this year.”
Andrew Hencic, Director & Senior Economist, TD Economics, said: “The labour market has now taken a breather for two consecutive months. The top line job losses are disappointing, but the focus should be on the unemployment rate. An uptick in September brings it back to where it was in June. We expect it to tread water in the coming months, as trade frictions and higher rates weigh on activity. One positive takeaway from this morning’s report was that private sector employment held steady, despite a decline in the labour force.
“Ultimately, this report is going to pour some more cold water on near-term rate hike expectations for the BoC. Markets are currently pricing 27% odds of a hike in October, and 88% for December, the latter down from being fully priced yesterday. We maintain the view that inflationary pressures are still relatively contained with average wage growth running at 2.4% and economic growth likely to slow further in Q4 as new tariffs weigh on activity. Given this backdrop we expect the BoC to remain data-dependent and stay on hold in October.”
Douglas Porter, Managing Director, Chief Economist, said: “A second consecutive month of sizable job losses washes away the surprising strength reported in Canada’s job market through the early summer, and leaves employment up a so-so 0.5% from a year ago. While the large drop in education looks somewhat suspect (especially since it was entirely in one province), the underlying picture in other regions and industries does not inspire confidence. The pullback in manufacturing may be an early warning of the weight from the amped-up trade tussle. On balance, we continue to believe that the appropriate stance by the Bank of Canada is watchful waiting, particularly so with employment suddenly clouding over. The key CPI and Business Outlook Survey are both due on October 19, but this sour result greatly diminishes the chances (let alone the rationale) for rate hikes.”
Claire Fan, Senior Economist, RBC Economics, said: “Canada’s labour market lost 68,000 jobs in September, driven by losses in public sectors (education and health care), piling onto the 42,000-job loss in the prior month. These losses reversed most of the job growth seen over the summer and leave the year-to-date employment count at -41,000.
“The monthly employment counts are notoriously volatile, and there are reasons not to read too much into the softer reading too quickly. In September, 70%, or 48,000, of the decline in employment was among those aged 15 to 24, a group that typically sees seasonal headwinds around this time of year after the school year starts. The unemployment rate, as a more stable and reliable gauge of labour market conditions, ticked up slightly from 6.4% to 6.5% but remained 0.6 percentage points below a year ago.
“Looking ahead, we continue to point to important leading indicators such as job openings from Indeed.com as indications that hiring demand has not retreated to a problematic extent since new U.S. tariffs (that cover a small scope of Canadian exports) were imposed. We expect progress made in Canada’s labour market earlier will be largely sustained, and the unemployment rate to broadly edge lower through the end of 2026.”
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