Canada experienced a setback in its labor market during August, shedding 42,000 jobs, as reported by Statistics Canada on Friday. This decline came as a surprise to some experts, who had anticipated a fourth consecutive month of job gains starting from May. The unemployment rate remained unchanged at 6.4 percent for the month.
According to the latest Labour Force Survey, the public sector saw a reduction of 20,000 jobs for the third consecutive month, while there was little change in the private sector. Notably, the manufacturing industry stood out with an addition of 22,000 jobs in August, while sectors such as public administration, natural resources, and utilities experienced declines.
CIBC chief economist Andrew Grantham highlighted that manufacturing was the only sector to significantly increase employment in August. He noted that the current data aligns with other indicators suggesting a slowdown in the economy for Q3 following a robust second quarter, especially amidst uncertainties surrounding U.S. trade.
Quebec bore the brunt of job losses with 19,000 fewer positions, followed by Ontario with an 18,000-job decrease. Bank of Montreal chief economist Douglas Porter remarked that after a series of strong job reports, it was expected that Canada would face a reality check soon.
Statistics Canada revealed that average hourly wage growth in August hit a nearly nine-year low, slowing down to two percent annually from 2.8 percent in July and 3.3 percent in June.
Contrary to expectations, a Reuters poll predicted a job increase of 15,000 for August, with the unemployment rate remaining at 6.4 percent. This downturn breaks a streak of positive monthly results, with Canada adding 75,000 jobs in July and a total of 181,000 jobs from April to July.
The latest job report coincides with escalating trade tensions between Canada and the U.S., with President Donald Trump imposing tariffs on Canadian products and Canada retaliating in kind. To support affected workers and businesses, the Canadian government introduced a $7.5 billion expanded economic relief program, adding to previous tariff support measures.
Industries heavily reliant on U.S. demand for exports continue to face economic uncertainty, with a higher layoff rate noted in these sectors over the past 12 months leading up to August. Scotiabank economist Mitch Villeneuve highlighted a gradual decline in the share of Canadian exports destined for the U.S., emphasizing increased growth in non-U.S. markets, particularly Europe.
In contrast, the U.S. labor market saw a positive trend in August, with employers adding 162,000 jobs, as reported by the U.S. Labor Department. Trump expressed satisfaction with the increased employment numbers and hinted at potential actions regarding interest rates and trade deficits.
Despite these developments, many economists anticipate the Bank of Canada maintaining its policy rate at 2.25 percent for the remainder of the year.