Canada lost an estimated 68,000 jobs in September 2026, and the unemployment rate rose to 6.5%. The decline was the second in a row, but economists quoted on October 9 generally expected the Bank of Canada to hold its policy rate on October 28—not to react automatically to one volatile report. They saw a softer labour market, tempered by uncertainty about monthly estimates, seasonal youth employment patterns, tariff effects and inflation risks.
What Statistics Canada reported for September
Statistics Canada’s Labour Force Survey, released October 9, estimated employment fell by 68,000, or 0.3%, in September. The unemployment rate rose 0.1 percentage points to 6.5%. The survey’s reference week was September 13–19; this is an estimate of employment, not a tally of announced layoffs.
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The result followed a 42,000 decline in August. That two-month pullback came after employment grew by 181,000 from April through July, and the number of employed people remained 95,000 higher than a year earlier. Those comparisons matter: the latest figures show weakening momentum, not by themselves a collapse in the overall level of employment.
Other indicators were mixed. The participation rate—the share of the population working or looking for work—fell to 64.8%, its lowest reading since December 1997 when the pandemic period is excluded. Statistics Canada attributed most of the year-over-year decline to population aging. Average hourly wages were up 2.3% year over year, compared with 2.0% in August.
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Why economists saw a warning, not a verdict
Two monthly declines point to softer conditions
Andrew Hencic, director and senior economist at TD Economics, said the labour market had “taken a breather for two consecutive months.” He urged attention to the unemployment rate as well as the employment count, and said the release would “pour some more cold water on near-term rate hike expectations for the BoC.” His forecast for an October hold remained dependent on incoming data.
The broader labour-market measures also indicate less ease in finding work. Statistics Canada put the job-finding rate at 30.6%, down from 32.8% a year earlier and below the 2017–2019 average of 36.5%. At the same time, the layoff rate was 0.7%, similar to 0.6% a year earlier and the 2017–2019 average. Taken together, these figures are consistent with a less dynamic job market, but not evidence of an unusually broad wave of layoffs.
Monthly estimates and youth seasonality complicate the headline
Claire Fan, senior economist at RBC, cautioned that “the monthly employment counts are notoriously volatile, and there are reasons not to read too much into the softer reading too quickly.” Employment among people aged 15–24 fell by 48,000, or 1.8%, in September; the two-month decline was 67,000. The youth labour force also shrank, while youth unemployment was little changed at 13.0%. Fan noted that youth employment can face seasonal headwinds as school resumes, and expected earlier labour-market gains to be largely sustained.
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The report also showed employment among women aged 25–54 down 28,000, with their unemployment rate up 0.3 percentage points to 5.3%. These details show that the headline decline was not confined to one age group, even though youth accounted for the largest reported employment drop.
Tariffs may be a risk, but the report does not establish the cause
September was described in market reporting as the first full month covered after a new round of U.S. tariffs took effect. But the largest employment declines were in public-sector-related industries, and the official survey does not show that tariffs caused the aggregate drop.
Andrew Grantham, an economist at CIBC, said the weakness was “likely more a reflection of data volatility than the impact of new US tariffs,” while adding that it supported the Bank of Canada remaining patient. He also pointed to hours worked as a sign of a weak end to third-quarter GDP and a weak handoff into the fourth quarter, with possible further unemployment increases in tariff-affected sectors. This is a risk assessment, not proof that tariffs explain the September total.
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Where employment fell—and where it did not
The distribution helps explain why a large national monthly decline does not describe every sector or province. All figures below are seasonally adjusted. Canada-level Labour Force Survey estimates exclude the territories.
| Group or sector | September change | Context |
|---|---|---|
| Public sector | Down 70,000 | Fourth consecutive monthly decline. |
| Private sector | Little changed | Still 163,000 higher than a year earlier. |
| Education | Down 35,000 | Down 67,000, or 4.2%, year over year; Statistics Canada linked much of the annual decline to Quebec, Ontario and Alberta. |
| Health care and social assistance | Down 23,000 | Still up 93,000, or 3.2%, year over year, and the largest contributor to annual employment growth. |
| Manufacturing | Down 13,000 | After an August increase; employment was little changed year over year. |
| Quebec | Down 49,000 | Statistics Canada said employment had been trending downward since the start of the year. |
| British Columbia | Down 20,000 | Monthly decline. |
| Alberta | Up 23,000 | Monthly increase. |
For the annual education decline, secondary reporting also mentioned lower international student numbers. That context does not change the official sector estimate, and it should not be mistaken for a complete explanation of the monthly national result.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the report meant for the October 28 rate decision
As of October 11, the Bank of Canada’s October 28 decision had not yet been announced. The October 9 roundup by Canadian Mortgage Professional described broad expectations of a hold, but the economists’ reasoning was conditional rather than unanimous certainty.
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Charles St-Arnaud, chief economist at Servus Credit Union, described the policy problem as a “dilemma”: a weak labour market and likely growth slowdown amid a more intense trade conflict on one side, and high fuel prices that could add to inflationary pressure on the other. He said the Bank would likely choose patience and keep its policy rate unchanged for the rest of the year unless CPI data showed inflation broadening.
Sherry Cooper, chief economist at Dominion Lending Centres, likewise expected the Bank to hold off on a rate hike, particularly if the inflation report due October 19 brought no “nasty surprises.” Her comments also pointed to the relationship between Canadian and U.S. bond yields: Canadian yields were more than 100 basis points below U.S. yields but typically moved in the same direction. A jobs report alone therefore cannot determine the path of borrowing costs.
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The 2.3% annual wage increase and fuel-price concern were counterweights to weak hiring in economists’ policy discussion. The question was not simply whether employment was down, but whether softer demand would persist and whether inflation would stay contained enough to change the Bank’s balance of risks.
What households should—and should not—infer
A softer jobs report can affect expectations for interest rates, but it does not guarantee an immediate cut or cheaper borrowing. The policy rate is directly relevant to variable-rate mortgages and lines of credit; fixed mortgage rates are driven mainly by bond yields. A change in expectations can therefore affect different products differently, and the direction of fixed rates is not dictated by one employment release.
Most importantly, the economists’ October 9 views were forecasts made before the October 19 inflation release and October 28 decision. They were not promises, and they do not substitute for an individual assessment of borrowing needs.
Bottom line on September’s jobs shock
The release added evidence of a cooling labour market: employment declined for a second month, job-finding was weaker than a year earlier, and hours worked raised concern about near-term growth. Yet the fall followed substantial spring and summer gains, monthly estimates are volatile, youth figures have seasonal complications, and the layoff rate remained close to its historical comparison. Economists therefore treated the report as a reason for caution and patience—not conclusive proof of recession, a settled explanation involving tariffs, or an automatic signal for a Bank of Canada rate move.
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