Canada’s employment surprisingly shrinks in September, jobless rate inches up

OTTAWA -- Canada’s economy stunned widespread expectations to post a massive job loss in September and the unemployment rate edged up, data showed on Friday, effectively wiping off all the gains in jobs seen this year.

The economy lost a net of 68,300 jobs in September after a loss of 41,700 positions in August, Statistics Canada said. It said the unemployment level inched up to 6.5 per cent.

While September was the first full month of employment report after a new set of tariffs from the United States hit Canada, the job losses were not significantly higher in U.S.-facing industries. On the contrary, the biggest drop came from public sector employees, data showed.

Analysts polled by Reuters had forecast jobs gains of 9,200 and predicted the employment rate at 6.5 per cent, up from 6.4 per cent in August.

With the September report, Canada has effectively lost a net of 41,200 jobs this year, as against a solid gain of 211,300 seen for the same period a year ago.

The losses were almost equally divided between full-time and part-time workers and was led by educational services and healthcare and social assistance. Both the sectors form a substantial chunk of public sector employees and together lost 58,400 jobs.

A smaller number of international students coming into Canada was one of the reasons for decline in jobs in education services, StatCan said.

The manufacturing sector, a part of which is exposed to U.S., saw a net decline of 12,700 jobs.

Economists have said that the new U.S. tariffs impact only a small section of the jobs that are dependent on the U.S. and is not likely to have a major impact on the employment data in the coming months.

The September employment report is also the last set of job data before the Bank of Canada’s monetary policy decision announcement end of this month.

Money markets are pricing in no hike in October but the bets for a 25 basis point hike were slowly creeping up before the jobs data was released. Markets expect a 25 basis point hike in December.

The labour force participation rate, or the share of the population who are either employed or looking for work, fell 0.2 percentage points to 64.8 per cent in September, its lowest level in 29 years barring the pandemic era.

This was primarily due to an aging of population who are dropping off the work force, and not being replaced due to slower immigration.

Employment among the youth, or those aged between 15 and 24, declined in September and dropped by 48,000, following a smaller decline in August. Immigration control is also part of the reason for this decline.

The labour force continued to shrink in September, data showed.

The growth rate of permanent employees’ average hourly wages, a gauge of inflation, rose to 2.3 per cent year-over-year in September after dropping to two per cent in August, StatCan said.

The Canadian dollar weakened after the jobs report and was trading down 0.44 per cent at $1.4287 to the U.S. dollar, or 69.99 U.S. cents.

Yields on the two-year government bonds reversed early moves and were trading down 9.5 basis points to 2.410 per cent.

(Reporting by Promit Mukherjee; Editing by Dale Smith)