Canada’s labour market weakened sharply in September, with employment falling by 68,000 jobs and the unemployment rate rising to 6.5%, according to new data from Statistics Canada.
The September decline marked the second consecutive month of employment losses, following a reduction of about 42,000 jobs in August. The latest figures have raised concerns about the strength of the Canadian economy and could influence the Bank of Canada’s approach to interest rates later this month.
Employment Falls for Second Straight Month
Statistics Canada reported that employment declined by 68,000, or 0.3%, in September. The losses were almost evenly divided between full-time and part-time employment, with full-time jobs falling by 35,000 and part-time positions declining by 33,000.
The September decline came after employment fell by approximately 42,000 in August, reversing some of the gains recorded earlier in the year.
Before the two-month downturn, Canadian employment had increased by 181,000 between April and July.
Despite the recent losses, employment remained 95,000 jobs, or 0.5%, higher than a year earlier.
The employment rate, which measures the share of people aged 15 and older who are employed, fell 0.2 percentage points to 60.6% in September.
Unemployment Rate Rises to 6.5%
Canada’s unemployment rate increased from 6.4% in August to 6.5% in September.
The latest rate matches the level recorded at the beginning of 2026 and remains below the recent peak of 6.9% reached in April.
However, the labour market's deterioration was reflected in other indicators as well. The job-finding rate fell to 30.6% in September, compared with 32.8% a year earlier and an average of 36.5% during the 2017–2019 period.
At the same time, Canada's labour-force participation rate dropped 0.2 percentage points to 64.8%. Statistics Canada said this was the lowest level recorded since December 1997, excluding the COVID-19 pandemic period.
The decline in participation was linked partly to population ageing and slower population growth through immigration, which has reduced the number of people entering the workforce.
Young Canadians Were Hit Hard
Young workers experienced some of the largest employment losses during the month.
Employment among people aged 15 to 24 fell by 48,000, or 1.8%, in September. This followed another decline in August, bringing the total employment loss among young people over the two-month period to 67,000.
The number of young people participating in the labour force also dropped by 50,000 in September.
The youth unemployment rate, however, remained relatively unchanged at 13.0%.
The figures underline the difficulties younger Canadians are facing in finding and maintaining employment as competition for available positions remains elevated.
Education and Healthcare See Major Job Losses
The largest employment declines were concentrated in several industries.
Educational services lost 35,000 jobs in September, representing a 2.2% monthly decline. Employment in the sector was also down 67,000 jobs, or 4.2%, compared with September 2025.
Healthcare and social assistance employment fell by another 23,000 positions, or 0.8%. It was the sector's first monthly decline since December 2022, although employment remained 93,000 jobs higher than a year earlier.
Manufacturing employment also declined by 13,000 jobs, or 0.7%.
In contrast, employment in other services, including repair and maintenance as well as personal and household services, increased by 17,000 jobs.
The public sector experienced an especially significant decline. Public-sector employment fell by 70,000 jobs in September, marking the fourth consecutive monthly decline.
Compared with a year earlier, the number of public-sector employees was down by 119,000, with much of that reduction coming from educational services.
Quebec and British Columbia Record Significant Declines
The employment downturn was not evenly distributed across Canada.
Quebec recorded the largest provincial decline, losing 49,000 jobs, or 1.1%, in September. The province has experienced a sustained employment decline since the beginning of the year, with employment down by 130,000 jobs, or 2.8%, between January and September.
Quebec’s unemployment rate rose 0.4 percentage points to 6.0%.
British Columbia lost 20,000 jobs, or 0.7%, in September, while Manitoba recorded a decline of 4,400 jobs.
Ontario's employment edged down by 20,000 jobs, although the province remained 86,000 jobs above its level a year earlier. Its unemployment rate remained at 7.0%.
Alberta was among the provinces moving in the opposite direction. Employment increased by 23,000 jobs, or 0.9%, in September, while the province's unemployment rate fell to 6.4%.
Wages Continue to Rise
Despite the decline in employment, wage growth accelerated slightly.
Average hourly wages for employees increased by 2.3% year over year in September, reaching $37.64. That compared with annual wage growth of 2.0% in August.
The increase in wages could remain important for the Bank of Canada as policymakers balance weaker employment conditions against inflationary pressures.
The September labour-force data also showed that the layoff rate remained relatively low at 0.7%, compared with 0.6% a year earlier and an average of 0.6% between 2017 and 2019.
Weak Jobs Report Complicates Bank of Canada Outlook
The latest employment figures could make the Bank of Canada more cautious about raising interest rates.
Reuters reported that financial markets reduced expectations of an interest-rate increase at the central bank's upcoming October meeting following the weaker-than-expected jobs report.
Economists had expected Canada to add approximately 9,200 jobs in September, while the actual figures showed a loss of 68,300 positions.
Royce Mendes, head of macro strategy at Desjardins, said the deterioration in the labour market would likely encourage Canadian policymakers to leave rates unchanged later this month, although inflation pressures could still create a case for tighter policy later.
The Canadian dollar weakened following the release, falling to an 18-month low against the US dollar as investors reassessed the outlook for Canadian interest rates.
Canada’s Labour Market Faces a Difficult Autumn
September's employment figures present a mixed picture for Canada's economy.
While employment remains slightly higher than a year ago and wage growth continues, the back-to-back monthly declines indicate that labour-market momentum has weakened significantly since the spring.
The concentration of losses among young workers, public-sector employees and several major industries adds to the concern.
At the same time, regional performance remains uneven, with Alberta continuing to add jobs while Quebec and British Columbia recorded substantial declines.
For the Bank of Canada, the challenge is balancing the weakening labour market against inflation risks, including higher energy prices and broader economic pressures.
The next Labour Force Survey will be released on November 6, providing the first detailed look at employment conditions in October.
