Canada Loses 68,000 Jobs in September as Unemployment Rises to 6.5%
Canada's labour market shed 68,000 jobs in September 2026, marking a second consecutive monthly decline and pushing the unemployment rate to 6.5%. The public sector led the losses, while trade frictions with the United States continue to weigh on economic activity ahead of the Bank of Canada's October interest rate decision.
Canada’s labour market contracted for a second straight month in September 2026, losing 68,000 jobs following a decline of 42,000 positions in August. The unemployment rate ticked up to 6.5 per cent from 6.4 per cent, according to data from Statistics Canada.
The public sector recorded the steepest drop, shedding 70,000 positions. Half of those losses were attributed to education services in Quebec. Over the past year, public sector employment has fallen by 119,000. Health care and social assistance also posted their first monthly decrease since December 2022.
Regionally, Quebec experienced the largest decline with 49,000 job losses. British Columbia and Ontario each lost 20,000 jobs, while Manitoba saw a reduction of 4,400 positions. Alberta was a notable exception, adding 23,000 jobs during the month.
Young workers were disproportionately affected. Employment among youth aged 15 to 24 fell by 48,000, marking a second consecutive monthly loss and pushing the youth unemployment rate to 13 per cent. Among core-age workers, the unemployment rate stood at 5.3 per cent for women aged 25 to 54 and 5.8 per cent for men in the same age group.
The overall labour force participation rate dropped to 64.8 per cent, its lowest level since December 1997 excluding the early pandemic period. This decline in participation helped mitigate what would otherwise have been a sharper rise in the unemployment rate.
Manufacturing employment also declined amid intensifying trade tariffs from the United States. Negotiations between Ottawa and Washington regarding trade have been suspended since August due to the heightened tariff environment, and economists view the manufacturing contraction as an early warning sign of broader trade war impacts.
The Bank of Canada’s key interest rate currently stands at 2.25 per cent, with the next policy decision scheduled for October 28. Economists from institutions including the Bank of Montreal, Toronto-Dominion Bank, and Desjardins expect the central bank to hold rates steady. Analysts such as Douglas Porter, Andrew Hencic, David MacNicol, and Royce Mendes have pointed to the weak employment data and ongoing trade frictions as key factors reinforcing forecasts that the Bank of Canada will pause, as economic activity remains weighed down by higher interest rates and cross-border trade tensions.