Canada's job market erases 2026 gains with back-to-back monthly losses

Overview

Updated 57 minutes ago

Canada's labour market lost 68,000 jobs in September, the second straight monthly decline, erasing the employment gains made earlier in 2026. The unemployment rate inched up to 6.5% and the share of Canadians working or looking for work fell to its lowest level since 1997, outside the pandemic years.

The losses were concentrated among young Canadians, who accounted for 48,000 of September's decline, and in the public sector, which shed 70,000 jobs in its fourth consecutive monthly drop. Education and health care led the cuts as the government reduced staffing tied to fewer international student permits. New U.S. tariffs took effect in September, but job losses were not notably higher in export-facing industries.

Why it matters

With two months of job losses and participation at a 29-year low, the Bank of Canada faces pressure to hold rates despite inflation.

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Key Indicators

-68,000

September employment change

Second straight monthly decline; 48,000 of the losses were among workers aged 15 to 24.

6.5%

Unemployment rate

Up 0.1 point from August, the same as at the start of 2026, after peaking at 6.9% in April.

64.8%

Labour force participation rate

Lowest since December 1997 excluding the pandemic, driven largely by population aging.

-41,200

Net jobs lost this year

Versus a gain of 211,300 in the same period of 2025.

2.3%

Year-over-year wage growth

Average hourly pay rose to $37.64, up from 2.0% growth reported in August.

Voices

Curated perspectives — historical figures and your fellow readers.

Ever wondered what historical figures would say about today's headlines?

People Involved

Tiff Macklem

Governor of the Bank of Canada

Weighing a rate decision after two straight monthly job losses

Organizations Involved

Statistics Canada

Federal statistics agency

Publisher of the monthly Labour Force Survey

Canada's national statistics agency and publisher of the monthly Labour Force Survey.

Bank of Canada

Central bank

Considering monetary policy amid soft employment

Canada's central bank, which sets the overnight interest rate eight times a year.

RBC Economics

Bank research arm

Analyzing labour market trends

Research division of the Royal Bank of Canada.

Desjardins

Financial cooperative

Economic analysis

Canada's largest cooperative financial group, with an economic studies arm.

Timeline

April 2026 October 2026

4 events Latest: 2 days ago

Tap a bar to jump to that date

October 2026
September job losses erase 2026 gains
Latest Economic data

Statistics Canada reports 68,000 jobs lost in September; unemployment ticks up to 6.5%, participation hits a 29-year low.
2 days ago
September 2026
New U.S. tariffs take effect
Trade

First full month under the duties, which cover a small share of Canadian exports. Job losses fall mainly on public sector, not export industries.
September 2026
August 2026
Hiring streak snaps
Economic data

Employment falls about 42,000, the first monthly decline of 2026.
August 2026
April 2026
Four-month hiring upswing begins
Economic data

Employment rises in each month from April through July, adding 181,000 jobs.
April 2026

Scenarios

Bank of Canada holds rates through 2026

Likely Resolves by End of 2026

Discussed by: Money markets and economists quoted in the Financial Post

The September report was the second straight monthly decline and followed a year-to-date net loss of 41,200 jobs. RBC Economics says monthly counts are volatile, but with unemployment rising and participation at a 29-year low, the bank has cover to keep its policy rate unchanged. Markets stopped pricing an October hike after the data and now expect any move in December. In this scenario, the December decision is a hold too.

Unemployment pushes past 7% by spring 2027

Possible Resolves by Apr 30, 2027

Discussed by: Desjardins Economic Studies and Financial Post coverage

If public sector cuts continue, unemployment could climb past 7% for the first time since early 2021. Education has shed 67,000 jobs over 12 months, and health care, though up 93,000 over the year, posted its first monthly decline since 2022. The job-finding rate is already 30.6%, below the 36.5% average from 2017 to 2019, meaning fewer unemployed workers are landing jobs. A spring reading above 7% would signal genuine labour market weakness.

Hiring stabilizes, employment flattens into 2027

Possible Resolves by Jan 31, 2027

Discussed by: RBC Economics

RBC argues the August and September counts are noisy and that 70% of the September decline hit youth aged 15 to 24, a group with seasonal headwinds after the school year starts. It points to Indeed.com job postings as evidence hiring demand has not retreated since the U.S. tariffs, which cover a small share of Canadian exports. In this scenario, winter surveys show near-flat employment and the unemployment rate settles around 6.5%.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2008-2009

Canada's 2008-09 recession

When the global financial crisis hit, Canadian employers cut hundreds of thousands of jobs and the unemployment rate climbed from about 6% in 2008 to above 8.5% by mid-2009. The Bank of Canada cut its policy rate to 0.25%, its floor at the time.

Then

Employment recovered over roughly two years as the central bank held rates near zero and a commodity rebound lifted resource provinces.

Now

The episode cemented the Bank of Canada's practice of responding to labour-market weakness with aggressive easing, even when other pressures were present.

Why this matters now

Shows how a softening labour market can force the central bank's hand, a dynamic now at play as it weighs rate moves against weak jobs data.

1990-1992

Early 1990s Canadian recession

To break high inflation, the Bank of Canada under governor John Crow pushed interest rates sharply higher. A deep recession followed, shedding hundreds of thousands of jobs, and the unemployment rate rose above 11%, its highest in decades.

Then

Unemployment stayed elevated for years, with manufacturing-heavy regions like Ontario and Quebec hit hardest.

Now

The episode is often cited as a cautionary tale about tightening into a weakening economy; inflation control came at the cost of a prolonged jobs slump.

Why this matters now

A parallel for policymakers weighing whether to raise rates now - the September data argue for caution.