Canada’s labour market weakened again in September, with a second straight month of job losses and softer conditions across several key indicators. Employment fell by 68,000, the unemployment rate rose to 6.5%, and labour force participation dropped to its lowest non-pandemic level since 1997, but driven largely by an aging population and lower immigration. 

The weakness was broad-based, affecting both full-time and part-time work, with notable losses among youth, women aged 25 to 54, and in sectors including education, health care and manufacturing. British Columbia also recorded a monthly employment decline of 20,000 jobs -- the first monthly decline since March, while Alberta was one of the few provinces to post gains. Overall, the latest data points to a labour market that is losing momentum and becoming less resilient heading into the fall.

Key Takeaways

Employment Levels: Employment levels weakened further in September, giving the labour market a noticeably softer and more uneasy tone. Canada shed 68,000 jobs (-0.3%), marking a second consecutive monthly decline after August’s 42,000 loss. The pullback was split almost evenly between full-time work (-35,000) and part-time work (-33,000), suggesting the weakness was not confined to one type of job. This is a disappointing turn after employment had risen by 181,000 from April to July. The employment rate fell to 60.6%, its second straight monthly decline, and was unchanged from a year earlier. Public sector employment was a major drag, falling by 70,000 in September and by 119,000 year-over-year.

Unemployment and Participation Rates: The unemployment picture softened slightly in September, with the jobless rate edging up to 6.5%, back to where it stood at the start of the year. The more revealing signal was participation, which fell to 64.8%, its lowest non-pandemic level since 1997. This gives the report a cautious undertone: Canada’s labour market is not only losing jobs, but also seeing fewer people actively attached to it. Statistics Canada points mainly to population aging as the driver, with those aged 65 and older making up a larger share of the working-age population. Tighter immigration rules may also be reinforcing this trend by reducing the inflow of younger, higher-participation workers who had previously helped offset demographic pressure.

Demographics and Job Types: The demographic details were especially telling. Youth workers had a difficult month, with employment among those aged 15 to 24 falling by 48,000 (-1.8%) for a second consecutive monthly decline. Over August and September, youth employment fell by 67,000, wiping out the gains recorded earlier from April to July. Women aged 25 to 54 also faced pressure, with employment down 28,000 (-0.4%) and their unemployment rate rising to 5.3%. That gives the report a somewhat discouraging tone, even though the broader year-over-year picture is less severe. Core-aged men held steadier, with employment essentially unchanged and their unemployment rate falling to 5.8%. Workers aged 55 and older saw unemployment rise to 5.3% as more people looked for work.

Sectoral Breakdown: Sectoral performance was uneven and somewhat unsettled, with losses concentrated in several large and labour-intensive industries. Educational services recorded the sharpest decline, down 35,000 (-2.2%) in September, following seven months of little change. Health care and social assistance also fell by 23,000 (-0.8%), its first monthly decline since December 2022, though the sector remained the largest contributor to employment growth over the past year. Manufacturing gave back some of August’s gain, losing 13,000 jobs (-0.7%). The main area of resilience came from “other services,” which added 17,000 jobs (+2.1%) and was up 32,000 year-over-year. Overall, the sectoral story points to a labour market losing breadth rather than simply cooling in one corner.

Provincial Trends: Provincial trends were mixed, but the weakness was clearly concentrated in a few major markets. Quebec posted the largest decline, with employment falling by 49,000 (-1.1%) in September after a 19,000 drop in August. The province has now seen employment trend down since the start of the year, with a cumulative decline of 130,000 from January to September. British Columbia also had a disappointing month, losing 20,000 jobs, its first monthly decline since March. Ontario edged down by 20,000, though employment remained higher than a year earlier. Alberta was the most encouraging counterweight, adding 23,000 jobs and lowering its unemployment rate to 6.4%. Newfoundland and Labrador and Prince Edward Island also recorded modest gains.

Commentary: 

"Canada’s labour market lost more ground in September, marking a second straight month of job losses after a stronger spring and summer run. Employment fell by 68,000, following a 42,000 decline in August, reversing part of the momentum built between April and July. The employment rate slipped to 60.6%, unemployment edged up to 6.5%, and the share of working-age Canadians employed or looking for employment fell to 64.8%, its lowest non-pandemic level since 1997. The weakness was concentrated among youth and women aged 25 to 54, with both full-time and part-time work declining. Public sector employment also fell for a fourth month in a row, while education, health care and manufacturing led the sectoral losses. Alberta was one of the few counterweights, adding jobs in an otherwise softer national picture. 

For the Bank of Canada, the report adds to the case for a more dovish tone at the October 28 decision, though it does not make a rate cut automatic. The labour market is clearly softening, but the Bank will still need to balance weaker hiring against inflation and broader uncertainty."   - Anupriya Gangopadhyay, Economist, Canadian Chamber of Commerce