Canada’s economy demonstrated resilience in September, as it added 60,000 jobs, a significant rebound after two months of losses. According to Statistics Canada, employment fell by a total of 106,000 in July and August. Despite this recovery, the national unemployment rate remained steady at 7.1%, due to increased participation in the labor market.
Positive Job Growth Amid Challenges
The recent job gains come in the context of a U.S.-driven trade war, which has impacted various export sectors, leading to cautious hiring practices among employers. Nonetheless, the Canadian economy has avoided severe downturns expected earlier in the year when trade tensions escalated.
Doug Porter, chief economist at Bank of Montreal, emphasized the importance of the latest employment report, stating that it is a welcome change following significant declines in previous months. He noted that while the job market is stabilizing, it remains exposed to uncertainties surrounding trade policies.
Short-Term Gains with Long-Term Concerns
Despite the positive jobs report, analysts warn against reading too much into short-term fluctuations. Employment growth this year stands at just 0.5%, and the unemployment rate has steadily increased since 2022, primarily influenced by rising interest rates and reduced hiring efforts by businesses.
Royce Mendes, head of macro strategy at Desjardins Securities, highlighted that the unemployment rate effectively reflects supply and demand dynamics in the labor market. The latest employment figures have cast doubt on the Bank of Canada’s interest rate decisions, with market expectations shifting regarding potential cuts in rates.
- Probability of a quarter-point interest rate reduction on October 29 is currently around 55%.
- Bank of Canada’s policy rate is now set at 2.5%, following recent cuts.
Sector-Specific Insights
The job growth in September was predominantly due to full-time positions, with the manufacturing sector seeing a resurgence, adding 28,000 jobs. The province of Alberta led the way, adding 43,000 positions.
- Youth unemployment rate stood at 14.7% in September, marking the highest level since 2010, excluding early pandemic metrics.
- Manufacturing employment remains below summer levels, indicating ongoing struggles in this sector.
Prime Minister Mark Carney’s recent discussions with U.S. President Donald Trump included topics related to tariff relief for Canadian steel and aluminum industries. Although most Canadian goods enter the U.S. tariff-free, certain targeted sectors, including steel and lumber, face significant duties.
The U.S. did not issue its September jobs report as scheduled due to a government shutdown. However, recent trends indicate a notable slowdown in U.S. job growth this year.
