Canada’s job loss throws October rate hike into doubt
Canada’s labour market suffered its deepest monthly setback of 2026 in September, with the economy shedding 68,300 jobs. The result blindsided analysts and has reset the calculus ahead of the Bank of Canada’s October 28 rate decision.
Statistics Canada reported Friday that the unemployment rate climbed to 6.5% in September, back to where it stood at the start of the year. The country has now lost a net 41,200 positions in 2026, compared with net gains of 211,300 over the same stretch a year earlier.
The figures follow Canada’s August labour market report, which shed 42,000 positions from the count, marking the first two consecutive months of net losses since the post-pandemic period.
Public sector bears the brunt
Educational services shed 35,000 positions and health care and social assistance fell by 23,000, together accounting for 58,400 of September’s losses.
Slower international student arrivals contributed to the education sector’s decline. Job losses were nearly evenly split between full-time and part-time workers.
The manufacturing sector, which carries partial exposure to American trade duties, declined by 12,700 roles.
Still, losses were not markedly concentrated in US-facing industries, a finding that points to structural and demographic forces as much as trade tensions.
Provincially, Québec recorded the sharpest decline at 49,000 positions, while Ontario and British Columbia each lost 20,000 jobs.
Alberta added 23,000 roles, the only major province to post gains.
The labour force participation rate fell 0.2 percentage points to 64.8%, its lowest level outside the pandemic era in 29 years. Statistics Canada attributed the decline to an ageing population exiting the workforce and fewer younger workers entering it under tighter immigration controls.
What this means for Bank of Canada
Andrew Hencic, Director and Senior Economist at TD Economics, was direct in his assessment of the September data’s implications for monetary policy.
“Ultimately, this report is going to pour some more cold water on near-term rate hike expectations for the BoC,” Hencic said.
“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.”
CIBC earlier argued that the BoC rate hike case was weaker than Federal Reserve'sdue to the difference in their inflation problems. Meanwhile, UBS, Manulife, Oxford Economics and Scotiabank have expected an October increase.
Average hourly wages for permanent employees rose 2.3% year-over-year in September, up from 2.0% in August, a counterweight that the Bank of Canada’s policymakers will weigh carefully when the October 28 decision arrives.
The Bank has held its overnight rate at 2.25% through seven consecutive decisions in 2026.
Source CMP
By Liezel Once
