- Laura Gu
Senior Economist
Economic News
Canada: Hiring Cools in August as Summer Fades
September 4, 2026
Highlights
- Canada shed 42k jobs in August, falling short of market expectations for a 15k increase. The unemployment rate held steady at 6.4% in the month.
- Total hours worked rose 0.6% month over month (m/m) and were up 1.4% year over year (y/y). Average hourly wage growth decelerated for a second consecutive month to 2.0% y/y in August. Table 1 summarizes key labour market indicators.
- The August employment data left our Q3 real GDP growth tracking in the range of 1%-1.5% annualized, slightly weaker than the Bank of Canada’s latest Monetary Policy Report External link..
Comments
Canadian employment slipped by 42k in August, partly unwinding July’s 75k gains. The decline was concentrated in full-time employment (-36k), while part-time positions decreased by 6k.
The pullback in hiring looks more like a normalization than the start of a slump. Losses were spread across business, building and other support services (-20k), public administration (-8.8k) and natural resources (-7.7k), although employment in these industries was little changed from a year earlier. Manufacturing provided the main offset, adding 22k jobs.
Employment now sits 27k above its December 2025 level and 217k higher than a year ago. Over the past year, gains were concentrated in healthcare External link. and social assistance (+129k), information, culture and recreation (+49k), and transportation and warehousing (+47k). Wholesale and retail trade recorded the largest decline (-55k).
The unemployment rate held steady at 6.4%, as the decline in employment was matched by fewer people participating in the labour market. The labour market remains characterized by low hiring and low firing, with elevated long-term unemployment but layoffs still limited (graph 1).
Youth labour market conditions remain weak despite a better summer than last year External link. (graph 2). Youth employment led August’s decline, falling by 19k, while the unemployment rate edged up to 12.9%. Although down from 14.3% a year earlier, it remained well above its 10.8% pre-pandemic average. This weakness may in part reflect recent immigration policy changes.
Regional performance remained uneven (graph 3). The monthly employment decline was concentrated in Quebec (-19k) and Ontario (-18k). Year to date, Quebec and British Columbia are the only provinces to have shed jobs and could be disproportionately exposed to the latest round of US tariffs External link.. Most other provinces recorded modest year-to-date gains.
Wage growth cooled to 2.0% y/y, the slowest pace since November 2017 outside the pandemic-distorted years. This helps contain underlying inflation risks but raises concerns that real wages are declining.
Implications
With two-sided risks to inflation intensifying, the August LFS shouldn’t prompt the Bank of Canada External link. to come off the sidelines. A soft labour market and cooling wages speak to the downside risks to inflation from a likely weaker economy as renewed US tariffs threaten growth. However, given elevated energy prices and proposed Canadian counter tariffs add to inflation risks, we expect the Bank to hold at 2.25% through year-end, before hiking 50 basis points in the first half of 2027.
