Canada’s employment situation hit a roadblock in August, shedding 42,000 jobs, as reported by Statistics Canada on Friday. This downturn caught some analysts off guard, as they were expecting a fourth consecutive month of job growth since May.
The unemployment rate remained stable at 6.4 percent last month, according to the agency’s data.
The most recent Labour Force Survey revealed a decrease of 20,000 public sector jobs for the third month in a row, with minimal changes in private sector employment. However, the manufacturing sector stood out positively by adding 22,000 jobs in August, while sectors such as public administration, natural resources, and utilities experienced declines.
CIBC’s chief economist, Andrew Grantham, noted in a Friday research note that manufacturing was the sole sector to show a significant rise in employment during August. He linked this observation to other economic indicators like exports and monthly GDP, suggesting a slowdown in the economy for Q3 after a robust second quarter, amidst increased uncertainties regarding U.S. trade relations.
Regionally, Quebec took the hardest hit with a loss of 19,000 jobs, followed by Ontario with an 18,000 job decline.
Bank of Montreal’s chief economist, Douglas Porter, acknowledged that after a series of robust job reports, Canada was due for a reality check. He pointed out that while the latest report is soft, it was not entirely unexpected.
Statistics Canada indicated that the average hourly wage growth in August hit a nine-year low, with a slowdown to two percent on an annual basis, down from 2.8 percent in July and 3.3 percent in June.
A Reuters survey of economists had forecasted an addition of 15,000 jobs in August, with the unemployment rate expected to remain at 6.4 percent.
The August data broke a streak of monthly job gains, with the Canadian economy adding 75,000 jobs in July. From April to July, a total of 181,000 jobs were created.
The latest employment report comes at a time of heightened trade tensions between Canada and the United States, with President Donald Trump imposing significant tariffs on Canadian products. In response, Canada will reciprocate with tariffs on U.S. goods.
To support affected workers and businesses, the federal government introduced a $7.5-billion expanded economic relief program, in addition to the nearly $25 billion in tariff support implemented over the past 18 months.
Industries relying on U.S. export demand continue to face economic uncertainty, with higher layoff rates observed compared to other sectors over the past year leading up to August.
While Canada’s labor market cooled in August, the situation across the border in the U.S. was more upbeat. The U.S. Labor Department reported that American employers added 162,000 jobs in August, with a steady unemployment rate of 4.1 percent.
President Trump praised the strong U.S. job numbers, hinting at the possibility of the Federal Reserve lowering interest rates further. In contrast, many economists in Canada anticipate the central bank to maintain its policy rate at 2.25 percent for the remainder of the year.
