MediumIV Macro Policy & Sovereign Debt9 October 2026, Friday
Canada shed 68,000 jobs in September against expectations of a gain
Statistics Canada said employment fell by 68,000 (−0.3%) in September and the unemployment rate rose from 6.4% to 6.5%. According to TD Economics, the market had expected a gain of 10,000.
The Labour Force Survey released by Statistics Canada on 9 October shows a second monthly decline, after a loss of 42,000 in August. The employment rate fell 0.2 points to 60.6% and the participation rate dropped 0.2 points to 64.8%. Excluding 2020, the agency says participation is at its lowest since December 1997. Full-time employment fell by 35,000 and part-time by 33,000.
Losses were concentrated in sectors close to the public purse. Educational services shed 35,000 jobs, health care and social assistance 23,000 and manufacturing 13,000, while other services added 17,000. Average hourly wages rose 2.3% year on year to 37.64 Canadian dollars, up from 2.0% in August. Wage growth of 2.3% suggests the energy price shock has not yet passed through to labour costs.
The data hit rate expectations directly. According to TD Economics, before the release the market priced a 27% chance of a Bank of Canada hike in October and 88% by December. The bank wrote that it expects the hold to continue in October and that the report would weaken expectations of a near-term hike. The same day, the US 2-year Treasury yield rose 5 basis points to 4.80%, according to Strategitz. Persistent hike pricing in the face of weakening North American employment shows monetary policy caught between growth and energy inflation.
Talay assessment
Bottom line
Canadian employment has fallen by 110,000 in two months, and participation is at its lowest since 1997 outside 2020. Wage growth holding at 2.3% shows energy-driven inflation has not passed through to pay. The likeliest path is the Bank of Canada holding in October and the 88% pricing of a December hike receding.
Likely effects
- Canadian rate expectationsUncertainWeeks
A loss of 68,000 instead of the expected gain of 10,000 pulls down the 27% priced chance of an October hike; December pricing also becomes data-dependent.
- Canadian dollarNegativeWeeks
As Canadian hike expectations fade, the US 2-year yield rose to 4.80%; a widening front-end rate differential weighs on the Canadian dollar.
- North American growthNegative1–6 months
A two-month loss of 110,000 and participation of 64.8% show the energy shock passing into Canadian growth faster than into wages.
Possibilities, ranked
- 1Bank holds, December stays open60%
The Bank of Canada keeps rates on hold in October and leaves the December decision to inflation data.
Watch: Canada's September CPI and the text of the October rate decision
- 2Weakness deepens, hike priced out25%
If October employment also falls, the market largely prices out a December hike.
Watch: The October Labour Force Survey in early November
- 3Energy inflation prevails, bank hikes15%
If inflation expectations rise, the bank hikes in October despite weak employment.
Watch: Price expectations in the Bank of Canada's Business Outlook Survey
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Employment▼ −68,000
- Unemployment rate▼ 6.5%
- Participation rate▼ 64.8%