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Labour Markets Failing to Gain Momentum Once Again

Canadian Economics

By: Maxime Arseneau

    

Employment declined by 68,000 (-0.3 per cent) in September, following a 42,000 decline in August. The labour force participation rate fell by 0.2 percentage points to 64.8 per cent, while the unemployment rate edged up to 6.5 per cent from 6.4 per cent in August. Employment losses were almost evenly split between full-time (-35,000) and part-time (-33,000) positions.

  • Employment losses were concentrated among youth aged 15 to 24 (-48,000) and women aged 25 to 54 (-28,000).
  • Educational services recorded the largest industry decline (-35,000; -2.2 per cent), followed by health care and social assistance (-23,000; -0.8 per cent) and manufacturing (-13,000; -0.7 per cent).
  • Wholesale and retail trade employment also declined (-9,600), while employment increased in other services (+17,000; +2.1 per cent).
  • The employment rate declined by 0.2 percentage points to 60.6 per cent, its second consecutive monthly decrease. Despite the weakness over the past two months, employment remained 95,000 (+0.5 per cent) higher than a year earlier.
  • Labour market participation weakened further, with the participation rate falling to 64.8 per cent, its lowest level since December 1997 excluding the pandemic period.
  • Provincially, Quebec experienced the strongest employment decline (-49,400), followed by British Columbia (20,200) and Ontario (-20,000). Meanwhile, Alberta experienced 23,100 job gains in August.

Key insights

Labour market performance continues to be weighed down by job losses in Canada’s three largest provinces. Meanwhile, the rest of the country appears to be weathering the storm relatively well. Quebec and British Columbia have been among the provinces most affected by economic uncertainty since Donald Trump’s re-election. Employment in Quebec was down 2.1 per cent from January 2025 levels, while British Columbia recorded a decline of 0.6 per cent. Both provinces have faced higher effective U.S. tariff rates than much of the rest of Canada, putting pressure on several key industries. At the same time, growing uncertainty fatigue is taking its toll, weighing on businesses’ hiring decisions and increasing caution around workforce planning. In the rest of the country, employment growth has remained positive but unequal, ranging from 0.6 per cent in Ontario to 4.7 per cent in Alberta.

Looking ahead, we expect these trends to persist until a new trade agreement with the United States is reached. Labour market conditions are likely to remain volatile over the coming months. Trade negotiations with the U.S. are now officially on hold and are not expected to resume until after the midterm elections at the earliest. While any new agreement will likely entail higher tariff rates than those in place before the recent trade tensions, it would nonetheless reduce uncertainty and provide businesses and consumers with a more predictable environment in which to plan, invest, and spend.

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