Canada lost 42,000 jobs in August, surprising economists

Canada lost 42,000 jobs in August, Statistics Canada said Friday, contrary to some economists’ expectations, while the unemployment rate was unchanged at 6.4 per cent.

Statistics Canada said the number of public sector workers fell by 20,000, declining for a third consecutive month. Jobs were little-changed in the private sector.

The manufacturing industry was a bright spot in August, adding 22,000 jobs, while categories including public administration, natural resources and utilities all booked declines.

“Manufacturing was the only sector to record a statistically significant increase in employment during August,” CIBC chief economist Andrew Grantham wrote in a research note on Friday.

“Today’s print seems to tally with other evidence (exports, monthly GDP) that the economy is slowing again in Q3 following a strong second quarter and, with heightened uncertainty regarding U.S trade.”

By region, Quebec was hardest hit, losing 19,000 jobs. Ontario followed with a loss of 18,000.

“After a run of surprisingly hearty job results, it seemed Canada was almost due for a reality check. So while this is no doubt a soft report, it’s far from a shock,” Bank of Montreal chief economist Douglas Porter wrote on Friday.

A Reuters poll of economists had predicted employers would add 15,000 jobs in August, while the unemployment rate was expected to stay at 6.4 per cent, according to LSEG Data & Analytics.

Friday’s data snaps a string of monthly gains. The Canadian economy added 75,000 jobs in July. From April to July, those increases worked out to 181,000 jobs.

The latest jobs report comes as historic trade tension between Canada and the United States threatens a wide swath of industries. Last month, U.S. President Donald Trump imposed 50 per cent tariffs on about $28 billion worth of Canadian products. Starting Tuesday, Canada will match those levies with dollar-for-dollar tariffs on $27.6 billion of comparable U.S. goods.

Last week, the federal government rolled out a $7.5-billion expanded economic relief program for impacted workers and businesses. The new supports are on top of the nearly $25 billion in tariff support it implemented over the past 18 months.

Statistics Canada said Friday that industries dependent on U.S. demand for exports continue to face “an uncertain economic context.” The agency noted the layoff rate for workers in those industries has been higher than others over the 12 months leading up to August.

“The share of Canadian exports bound for the U.S. is gradually trending lower, averaging 76 per cent in 2024, and 72 per cent in 2025, and coming in at 66 per cent in July 2026,” Scotiabank economist Mitch Villeneuve wrote in a research note published on Thursday.

“This been driven by faster growth in exports to non-U.S. markets — especially Europe.”

On Wednesday, Bank of Canada Governor Tiff Macklem said that while the latest U.S. tariffs are “very steep,” they apply to a “relatively narrow” selection of goods.