Canada Jobs Report: 42,000 Lost in August, US Adds 162,000
Canada’s August jobs report landed at 8:30 am ET Friday alongside the American one, and the two went in opposite directions. Statistics Canada reported that employment fell by 42,000 (-0.2%) last month. A Reuters poll of economists reported by The Canadian Press had looked for a gain of about 15,000. In the United States, nonfarm payrolls rose by 162,000, roughly triple the consensus of about 56,000 that anchored this morning’s preview of both reports. Neither unemployment rate moved: Canada held at 6.4%, the US at 4.1%.
The American print did not just beat the average forecast. The forecast range going in ran from -25,000 to +121,000, so 162,000 came in above every estimate on the board. That is the sharpest version of the split, and it sets up the question Canadian investors now face: the Bank of Canada is weighing a weakening labour market against a tariff-driven price shock, while the Federal Reserve has been handed evidence that its own economy is still hiring.
Where Canada lost the jobs
August did not erase the summer. The decline “follows a cumulative increase of 181,000 (+0.9%) from April to July,” Statistics Canada said in its August Labour Force Survey release, and employment is still up 217,000 (+1.0%) from a year earlier, at 21,173,000.
The unemployment rate holding at 6.4% is less reassuring than it looks. The employment rate fell 0.1 points to 60.8% and the participation rate also fell 0.1 points, to 65.0%. The jobless rate stayed flat partly because fewer people were looking for work, not because the losses were absorbed elsewhere.
The declines were concentrated. Business, building and other support services shed 20,000 positions (-2.8%), public administration 8,800 (-0.7%), natural resources 7,700 (-2.3%) and utilities 5,600 (-3.5%). Manufacturing was the exception, adding 22,000 jobs (+1.2%). Statistics Canada offers no explanation for that gain, which is notable against the tariff backdrop.
By class of worker, the loss sat in the public sector. Employees there fell by 20,000 (-0.4%), “down for the third consecutive month. Since May, the number of public sector employees has declined by 78,000 (-1.7%).” Private sector employment was little changed on the month and remains 156,000 higher (+1.1%) than a year ago. Self-employment was also little changed month to month, and is up 80,000 (+3.0%) year over year.
Geographically, the losses sat in the two largest provinces. Quebec was down 19,000 (-0.4%) and Ontario down 18,000 (-0.2%). New Brunswick added 2,400 (+0.6%), and employment was little changed elsewhere. Younger workers took a disproportionate share: youth employment fell 19,000 (-0.7%) and the youth unemployment rate stood at 12.9%. Core-age employment (25 to 54) edged down by 16,000 (-0.1%), with the unemployment rate for core-age men rising 0.2 points to 6.0% while the rate for core-age women fell 0.2 points to 5.0%. For workers 55 and older the rate was 5.1%.
Then there is pay. Average hourly wages rose 2.0% year over year in August, a gain of $0.71 to $37.02, “following growth of 2.8% in July (not seasonally adjusted).” The level is not comparable month to month because the series is unadjusted, but the pace clearly cooled. Slower wage growth is disinflationary, and on its own it argues for easing room.
The tariff thread running underneath
The release also addressed trade exposure directly. Workers in industries “dependent on US demand for exports continue to face an uncertain economic context, compounded by the recent imposition of new US tariffs on Canadian exports. In the 12 months to August, the layoff rate averaged 0.9% for workers in industries dependent on US demand for exports. In comparison, the rate was 0.7% for other industries.”
That gap is small in absolute terms and pointed in what it says about where the strain is landing. It is also about to be tested from the other side. Canada’s counter-tariffs, tiered at 15%, 25% and 50% across $27.6 billion of US goods, take effect at 12:01 am Tuesday, September 8, adding a fresh cost increase on top of the softness this survey captured in August.
The US number that beat every forecast
The Bureau of Labor Statistics reported that “total nonfarm payroll employment increased by 162,000 in August”, with the unemployment rate unchanged at 4.1%, in line with expectations.
The revisions matter as much as the headline. July was revised up by 44,000, from a decline of 23,000 to a gain of 21,000, which turns a reported contraction into growth. June was revised up by 11,000, to 31,000. Average hourly earnings rose $0.10 (+0.3%) on the month to $37.75 and 3.1% year over year, a touch above the 3.0% consensus. The participation rate edged up to 61.6%, though it remains 0.5 points below where it stood in January.
The gains were led by food services and drinking places (+59,000) and local government education (+42,000), followed by construction (+22,000), manufacturing (+16,000) and health care (+13,000). Information was the notable decliner at -23,000.
Two central banks pulling apart
The Bank of Canada held its policy rate at 2.25% on Wednesday, September 2, and its statement flagged that upside inflation risks have increased. In comments reported by The Canadian Press, the Bank said federal support programs “will likely mitigate some of the harm,” but that uncertainty “may lead businesses to delay investment and hiring decisions.”
Friday’s report sharpens that bind rather than resolving it. Falling employment and wage growth of 2.0% both point toward more room to ease. The counter-tariffs arriving Tuesday point the other way on prices. The Bank’s next decision is Wednesday, October 28, alongside the Monetary Policy Report, which leaves close to two months of data before it has to choose. Today’s numbers strengthen the case that the labour market is softening. They do not settle what the Bank does with that.
The Fed’s calendar is far tighter. It decides on September 15-16, and going into Friday the market was pricing just under even odds of a rate hike, the baseline our morning preview used. A payroll print above the entire forecast range keeps a hike squarely on the table. Fed Governor Waller said Thursday that he would support holding if disinflation continues and a hike if August CPI runs hot, which effectively hands the decision to next week’s inflation reading rather than to today’s jobs data.
The loonie is where the split showed up
Markets gave the clearest verdict in currency. The Canadian dollar was trading at $0.7223 USD, down about 0.4% on the day ($1 USD buys $1.3845 CAD). Equities were quieter. The S&P/TSX Composite sat at 36,634.71, essentially flat at +0.01%, holding the ground it gained in Thursday’s 1.5% jump. South of the border the S&P 500 was at 7,708.39 (-0.51%) and the Nasdaq at 26,456.40 (-0.48%), the mirror image of Thursday’s move. The US 10-year Treasury yield was around 4.78%, up roughly a basis point from Thursday’s 4.762% close. The bond reaction was muted, which is consistent with much of the hike risk having been repriced earlier in the week. Market data as of late morning, September 4, 2026. Source: Yahoo Finance.
A weaker Canadian dollar cuts two ways for a Canadian portfolio. It flatters TSX exporters and commodity producers, and it mechanically lifts the Canadian-dollar value of unhedged US holdings. It also raises the cost of imported goods, which is an unhelpful direction in the week counter-tariffs take effect.
What to watch
Three things now carry the story. Next week’s US CPI reading arrives before the Fed’s September 15-16 meeting and, on Waller’s own framing, is the input that decides it. Canada’s counter-tariffs take effect at 12:01 am Tuesday, September 8. And the Bank of Canada’s next rate decision comes Wednesday, October 28, with the Monetary Policy Report attached, by which point it will have seen how much of the tariff cost reached consumers and whether August’s job losses were a pause in the spring rebound or the start of something longer.
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