The previously hot labour market stalled out to end the summer with a loss of 42,000 jobs in August, Statistics Canada said Friday.
The unemployment rate held steady at 6.4% last month, the agency said.
August’s losses fell short of economists’ expectations for a gain of 15,000 positions.
It puts an end to a hot streak for the labour market that saw 181,000 jobs added from April through July. The unemployment rate had dropped by half a percentage point over the previous three months.
Statistics Canada said there was little change in the private sector and self-employment in August, but the public sector shed 20,000 positions in its third straight month of losses.
The business, building and other support services sector led declines, followed by public administration, natural resources and utilities.
Andrew Hencic, senior economist at TD Bank, suggested in a note to clients Friday that one month of soft data should not define the labour market. Steadiness in the unemployment rate is more important than the headline job losses, he argued.
“Although disappointing, given the noisy nature of the data a step backwards is not a major surprise after a string of hot reports,” Hencic said.
The manufacturing industry has been hit hard by U.S. tariffs but the sector proved to be a surprise pocket of strength in August with a gain of 22,000 jobs.
August’s job figures only partially capture impacts from a new wave of 50% tariffs on about $28 billion worth of Canadian goods applied by the United States mid-month.
Statistics Canada said the layoff rate — the proportion of people who were unemployed as the result of a layoff between July and August — was 0.8% in August. That rate stood at 1% a year ago and averaged 0.9% for the same months in the three years before the Covid pandemic.
For industries reliant on export demand from the United States, Statistics Canada said the layoff rate was marginally higher over the past 12 months when compared with other sectors.
The annual increase in average hourly wages cooled to 2% in August, the agency said, down from 2.8% in July and 3.3% in June. The last time the annual wage increase was that low was November 2017.
Young workers aged 15 to 24 faced 19,000 job losses in August. Despite a tough end to the season, Statistics Canada said this past summer jobs market was statistically better for youth than last year.
On average, the jobless rate for students returning to school in the fall stood at 15.9% from May to August this year — two percentage points lower than the same period in 2025.
The Bank of Canada held its benchmark interest rate steady at 2.25% earlier this week.
The central bank signalled at the time that new U.S. tariffs were clouding the outlook for the economy. Governor Tiff Macklem said the economy was showing signs of a rebound heading into the re-escalating trade war, which puts Canada on more solid footing to handle the new duties.
At the same time, he said the central bank was concerned about lingering risks to inflation tied to the ongoing war in Iran.
CIBC senior economist Andrew Grantham said in a note to clients that the weak August jobs figures reinforce the case that growth is set to slow in the third quarter, adding to similarly soft data prints for exports and gross domestic product.
“With heightened uncertainty regarding U.S. trade, we continue to think that the Bank of Canada will remain on hold even after policymakers expressed greater concern over the inflation outlook earlier this week,” Grantham said.