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Canada's job market erases 2026 gains with back-to-back monthly losses

Canada's job market erases 2026 gains with back-to-back monthly losses

Money Moves

October unemployment rose to a six-month high, after back-to-back job losses erased 2026's gains and the Bank of Canada raised rates to 2.5%

5 days ago: October unemployment rate rises to six-month high

Overview

Updated 2 days ago

Canada's unemployment rate rose to a six-month high in October, Economy News reported on November 6. The increase followed back-to-back job losses in August and September that erased the gains made earlier in 2026.

The Bank of Canada raised its policy rate by a quarter point to 2.5% on October 28, its first increase since July 2023. It said higher energy prices and uncertainty over Canada's trade relationship with the United States were the biggest risks to inflation.

Why it matters

A rate hike into a weakening job market raises the risk that borrowers pay more while hiring stalls.

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Key Indicators

-68,000
September employment change
Second straight monthly decline; 48,000 of the losses were among workers aged 15 to 24.
6.5% (Sept.)
Unemployment rate
September rate; Economy News reported the rate rose to a six-month high in October.
64.8%
Labour force participation rate
Lowest since December 1997 excluding the pandemic, driven largely by population aging.
-110,000
Jobs lost in August and September
Back-to-back declines of 41,700 and 68,300 erased gains made earlier in 2026.
2.3%
Year-over-year wage growth
Average hourly pay rose to $37.64, up from 2.0% in August. Inflation was 3.1%.
2.5%
Bank of Canada policy rate
Raised by 25 basis points on October 28, the first increase since July 2023.
3.1%
Inflation rate
The Bank of Canada projected inflation to stay around 3% through much of 2027.

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People Involved

Tiff Macklem
Tiff Macklem
Governor of the Bank of Canada
Raised the policy rate to 2.5% on October 28, the first increase since July 2023
RM
Royce Mendes
Head of macro strategy, Desjardins
Expected the Bank of Canada to hold on October 28; it raised rates instead

Organizations Involved

Statistics Canada
Statistics Canada
Federal statistical agency
Publisher of the monthly Labour Force Survey

Canada's national statistics agency and publisher of the monthly Labour Force Survey.
Bank of Canada
Bank of Canada
Central bank
Raised the policy rate to 2.5% on October 28, the first increase since July 2023

Canada's central bank, which sets the overnight interest rate eight times a year.
EC
RBC Economics
Bank research arm
Analyzing labour market trends

Research division of the Royal Bank of Canada.
Desjardins
Desjardins
Financial cooperative
Economic analysis

Canada's largest cooperative financial group, with an economic studies arm.

Timeline

April 2026 November 2026

7 events Latest: 5 days ago
Tap a bar to jump to that date

  1. October unemployment rate rises to six-month high

    Latest Economic data

    The unemployment rate rose to a six-month high in October, according to Economy News.

  2. Bank of Canada raises policy rate to 2.5%

    Monetary policy

    The Bank of Canada raised its overnight rate by 25 basis points to 2.5%, the first increase since July 2023. It said further increases might be needed to keep energy costs from spreading into broader inflation.

  3. September job losses erase 2026 gains

    Economic data

    Statistics Canada reports 68,000 jobs lost in September; unemployment ticks up to 6.5%, participation hits a 29-year low.

  4. Markets cut odds of an October rate hike

    Markets

    Traders put the chance of a Bank of Canada increase on October 28 at about 25%, down from 40% before the jobs report. Markets expect any move in December.

  5. New U.S. tariffs take effect

    Trade

    First full month under the duties, which cover a small share of Canadian exports. Job losses fall mainly on public sector, not export industries.

  6. Hiring streak snaps

    Economic data

    Employment falls about 42,000, the first monthly decline of 2026.

  7. Four-month hiring upswing begins

    Economic data

    Employment rises in each month from April through July, adding 181,000 jobs.

Scenarios

1

Bank of Canada holds rates through 2026

Likely Resolves by End of 2026

Discussed by: Money markets and economists quoted in the Financial Post

Before the October 28 decision, money markets and economists expected the Bank to hold. That did not happen: the Bank raised its policy rate to 2.5%, so this scenario did not play out.

2

Unemployment pushes past 7% by spring 2027

Possible Resolves by Apr 30, 2027

Discussed by: Desjardins Economic Studies and Financial Post coverage

If public sector cuts continue, unemployment could climb past 7% for the first time since early 2021. Education has shed 67,000 jobs over 12 months, and health care, though up 93,000 over the year, posted its first monthly decline since 2022. The job-finding rate is already 30.6%, below the 36.5% average from 2017 to 2019, meaning fewer unemployed workers are landing jobs. A spring reading above 7% would signal genuine labour market weakness.

3

Hiring stabilizes, employment flattens into 2027

Possible Resolves by Jan 31, 2027

Discussed by: RBC Economics

RBC argues the August and September counts are noisy and that 70% of the September decline hit youth aged 15 to 24, a group with seasonal headwinds after the school year starts. It points to Indeed.com job postings as evidence hiring demand has not retreated since the U.S. tariffs, which cover a small share of Canadian exports. In this scenario, winter surveys show near-flat employment and the unemployment rate settles around 6.5%.

4

Bank of Canada raises rates in December

Possible Resolves by End of 2026

Discussed by: Money markets tracked by LSEG and Reuters

The Bank raised its policy rate to 2.50% on October 28 and said more increases might be needed. A quarter-point increase in December would lift the rate to 2.75%.

5

Bank of Canada holds at 2.5% in December

Possible Resolves by End of 2026

Discussed by: Bank of Canada Governor Tiff Macklem

The Bank said it would decide whether more increases are necessary one decision at a time. A hold in December would leave the policy rate at 2.5%.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

2008-2009

Canada's 2008-09 recession

When the global financial crisis hit, Canadian employers cut hundreds of thousands of jobs and the unemployment rate climbed from about 6% in 2008 to above 8.5% by mid-2009. The Bank of Canada cut its policy rate to 0.25%, its floor at the time.

Then

Employment recovered over roughly two years as the central bank held rates near zero and a commodity rebound lifted resource provinces.

Now

The episode cemented the Bank of Canada's practice of responding to labour-market weakness with aggressive easing, even when other pressures were present.

Why this matters now

Shows how a softening labour market can force the central bank's hand, a dynamic now at play as it weighs rate moves against weak jobs data.

1990-1992

Early 1990s Canadian recession

To break high inflation, the Bank of Canada under governor John Crow pushed interest rates sharply higher. A deep recession followed, shedding hundreds of thousands of jobs, and the unemployment rate rose above 11%, its highest in decades.

Then

Unemployment stayed elevated for years, with manufacturing-heavy regions like Ontario and Quebec hit hardest.

Now

The episode is often cited as a cautionary tale about tightening into a weakening economy; inflation control came at the cost of a prolonged jobs slump.

Why this matters now

A parallel for policymakers weighing whether to raise rates now - the September data argue for caution.

Sources

(19)
+13
Statistics Canada Reuters via Investing.com Reuters via U.S. News BNN Bloomberg RBC Economics Financial Post The Globe and Mail Desjardins Yahoo Finance Canada The Motley Fool Canada Bank of Canada CP24 Reuters via Kansas City Star Bloomberg CTV News Financial Post BNN Bloomberg Bank of Canada Economy News via Investing.com