AI Generated Summary
- Analysts now see greater odds of a cut at the next policy meeting on September 17—money market data puts the probability at 38%, up from 27% a day earlier.
- Canada’s labour market suffered a setback in July, with the economy shedding 40,800 jobs and pushing the national employment rate down to 60.
- “We are now a bit more confident that the Bank of Canada will resume cutting next month,” said Alexandra Brown, North America economist at Capital Economics, though she noted that an unexpectedly high inflation reading could delay that move.
Canada’s labour market suffered a setback in July, with the economy shedding 40,800 jobs and pushing the national employment rate down to 60.7%, its lowest level since November, Statistics Canada reported Friday. The decline erases much of June’s surprising gain of 83,000 jobs.
Despite the job losses, the unemployment rate held steady at 6.9%, hovering near a multi-year high. Economists surveyed by Reuters had expected modest job growth of 13,500 and a slight uptick in unemployment to 7%.
“Canada’s labour market snapped back to reality in July,” said Michael Davenport, senior economist at Oxford Economics, who warned that further weakness lies ahead. He forecasts as many as 140,000 more job losses by year-end, with unemployment climbing into the mid-7% range.
Manufacturing Hit by Tariffs
One of the hardest-hit areas has been manufacturing, where employment dropped by nearly 10,000 compared with July last year. The Bank of Canada has previously pointed to U.S. tariffs on steel, aluminium, and autos as a major drag on hiring in these industries. Marty Warren, national director of the United Steelworkers union, said around 1,000 members have already been laid off.
Job losses also piled up in the information, culture and recreation sector (down 29,000 positions), construction (down 22,000), and business, building and support services (down 19,000).
Youth Employment at 25-Year Low
Young workers bore the brunt of July’s downturn. The unemployment rate for those aged 15 to 24 rose to 14.6%, the highest since 2010 outside of the pandemic years. The group’s employment rate sank to 53.6%, its lowest in a quarter century when pandemic data is excluded.
Overall, Statistics Canada noted that net employment growth has been minimal since the start of 2025, while the layoff rate remains little changed at 1.1% compared with a year earlier.
Policy Implications
The Bank of Canada left its key interest rate unchanged last week, citing a still-strong labour market. However, analysts now see greater odds of a cut at the next policy meeting on September 17—money market data puts the probability at 38%, up from 27% a day earlier.
“We are now a bit more confident that the Bank of Canada will resume cutting next month,” said Alexandra Brown, North America economist at Capital Economics, though she noted that an unexpectedly high inflation reading could delay that move.
Average hourly wages for permanent employees rose 3.5% in July to C$37.66, slightly faster than June’s 3.2% increase, adding a wrinkle to the Bank’s inflation calculus.
The Canadian dollar dipped marginally on the news, trading at 72.71 U.S. cents.
