Canada's job market cooled sharply in August, with employment falling by 41,700 jobs, according to official labour-market data released on Friday. The drop came after an unusually strong run of hiring in the summer and left the unemployment rate unchanged at 6.4%.
Most of the decline was in full-time positions, which fell by 35,900, while part-time employment decreased by 5,800, Statistics Canada reported. The headline loss contrasted with expectations; analysts had been looking for roughly 15,000 net new jobs, and July's much larger gain of 75,100 now appears an outlier in a more volatile recent pattern.
The August figures also captured the tail end of temporary hiring that supported earlier gains. Census-related jobs and roles tied to the soccer World Cup contributed to an outsized increase of 181,000 positions between April and July. Those transitory boosts helped inflate recent monthly gains, obscuring a softer underlying trend in employment.
Service-producing industries - which account for about four in five jobs in the Canadian labour force - experienced the bulk of the weakness in August. That sector lost 51,500 positions, with the declines concentrated in business, building and support services as well as wholesale and retail trade. Other major service areas noted in the data include healthcare, education, transportation and finance.
Despite facing more than 18 months of U.S. trade restrictions, the Canadian economy had shown greater resilience than some anticipated, with widespread layoffs not materializing until now. Nonetheless, the data arrive ahead of a fresh round of measures: new 50% U.S. tariffs on certain imports, with reciprocal Canadian measures set to take effect from early next week. Those duties affect a relatively small portion of Canadian exports but are focused on vulnerable lines - notably wood products - raising the possibility that recent labour-market momentum could slow further.
The labour force itself contracted in August to 22,632 million, a decline that marked the first monthly shrinkage since February. That tighter labour-supply backdrop - attributed in the report to more restrictive immigration settings and an ageing population - has helped keep the unemployment rate near a two-year low even as overall employment falters.
Youth unemployment edged up 0.3 percentage points to 12.9% in August, reversing a downward trend observed from April through July. At the same time, wage momentum eased: the average hourly wage for permanent employees, a commonly watched inflation gauge, slowed to 2% in August from 3% in July, reaching its weakest rate in more than seven years outside of the pandemic period.
While the headline unemployment rate held steady, the underlying detail points to a labour market that has lost the strength seen earlier this summer. The coming weeks - as new tariff measures are implemented and temporary employment gains roll off - will be important for determining whether the recent softening is a pause or the start of a more extended slowdown.