Canada’s economy added 60,000 jobs in September, rebounding from two months of losses

The Canadian labour market snapped out of a funk in September, partially unwinding a spate of job losses over the summer.

The economy added 60,000 positions last month, after a cumulative loss of 106,000 jobs over July and August, Statistics Canada said Friday in a report. The unemployment rate held steady at 7.1 per cent as more people participated in the labour market.

Employment prospects have been dinged by the U.S.-driven trade war, resulting in job losses in certain export industries and a cautious approach to hiring from employers. But the Canadian economy has also avoided the worst-case scenarios that were envisioned in the spring, when the Trump administration began its assault on free trade.

“Today’s strong report is certainly welcome after the big declines in the prior two months,” Bank of Montreal chief economist Doug Porter said in a client note. “Canada’s economy continues to hang in there, treading water as it awaits more certainty on trade.”

Several analysts cautioned that Statscan’s jobs report can be volatile from month to month, and the long-term view is weaker than September’s upbeat results. Employment has grown by just 0.5 per cent this year, and the jobless rate has been grinding higher since 2022 – first because of higher interest rates, and lately because companies are scaling back their hiring plans.

“The unemployment rate remains the best arbiter of supply and demand conditions in the labour market,” Royce Mendes, head of macro strategy at Desjardins Securities, said in a client note.

Still, the September jobs gain has thrown some doubt on the Bank of Canada’s next move.

Interest rate swaps, which capture market expectations of monetary policy, are pricing in a 55-per-cent chance that the central bank will trim its key interest rate by a quarter-point on Oct. 29, according to data from the LSEG, or the London Stock Exchange Group. That’s down from 74-per-cent odds on Thursday.

The Bank of Canada resumed cutting rates last month – the policy rate is now 2.5 per cent – after three consecutive holds.

“Given the persistently elevated unemployment rate, we still believe the Bank of Canada needs to lower rates to get the economy back on track,” said Mr. Mendes, who expects rates to wind up at 2 per cent.

The September labour report offered some tentative signs of optimism. Job growth was entirely driven by full-time work, and the battered manufacturing sector added 28,000 positions. Alberta led the provinces with a whopping 43,000 jobs added in September.

There are, however, some persistent challenges in the labour market. For one, the youth unemployment rate (for those 15 to 24) rose to 14.7 per cent in September. That’s the highest youth jobless rate since September of 2010, excluding the early pandemic years.

Young Canadians face anxiety and burnout in a tough job market

And while manufacturing enjoyed a rebound last month, it’s generally struggling. Employment in the sector is lower today than in the summer of 2023.

Prime Minister Mark Carney met with U.S. President Donald Trump this week for the second time, with several Canadian officials staying behind in Washington to seek tariff relief for the steel and aluminum industries. The vast majority of Canadian goods still enter the United States tariff-free, which is blunting the impact of the trade war, but duties are steep in a handful of targeted industries, including steel, aluminum, autos and lumber.

The U.S. did not release its September jobs report last week, as previously scheduled, because of the government shutdown. However, recent data show that U.S. hiring has slowed markedly this year.