Ottawa, Canada – Canada’s unemployment rate rose to 7.1 percent in August, reaching its highest level since May 2016, Statistics Canada reported Friday. The increase reflects deepening strains in the labor market, with mounting job losses linked to slowing domestic demand and ongoing U.S. trade pressures.
The number of unemployed Canadians reached 1.6 million in August, up 34,000 from July, marking a 2.2 percent rise. Overall, the country lost 66,000 jobs during the month. Since January, the unemployment rate has climbed by half a percentage point, well above the pre-pandemic average of 6 percent between 2017 and 2019.
Ontario, Manufacturing Hit Hardest
Ontario bore the brunt of job losses, with key manufacturing hubs impacted by U.S. tariffs. Windsor recorded the highest unemployment rate in the country at 11.1 percent, followed by Oshawa at 9 percent and Toronto at 8.9 percent. British Columbia also saw sharp declines, losing 16,000 positions in August.
North American Job Markets Both Stall
Canada and the U.S. both experienced slow employment growth over the summer as businesses faced rising costs from tariffs and weakening consumer demand. In contrast to Canada’s job losses, the U.S. added only 22,000 jobs in August, far below expectations of 75,000, with the unemployment rate rising to 4.3 percent—the highest since 2021.
Broader Economic Impact
The weakness is no longer limited to trade-sensitive industries. Canada’s professional and scientific services sector shed 26,000 jobs in August, signaling that the slowdown is spreading across the broader economy. Self-employment also fell by 43,000, a decline of 1.6 percent.
Young workers face the toughest job market in 16 years (excluding the pandemic), with unemployment among 15–24-year-olds at 17.9 percent between May and August.
Central Banks May Respond
Economists warn that the August figures could prompt central banks to resume cutting interest rates. Royce Mendes, head of macro strategy at Desjardins Securities, said, “The ugly employment numbers released today should be enough to push those who had been in the ‘no cut’ camp to reassess their outlooks.” Markets are now pricing in a 90 percent chance that the Bank of Canada will lower its benchmark rate by a quarter point on September 17. The U.S. Federal Reserve is also expected to resume rate cuts after pausing since December 2024 amid inflation concerns.
Andrew Grantham, senior economist at CIBC Capital Markets, noted that the recent labor-market weakness isn’t confined to sectors most affected by U.S. tariffs, suggesting the Bank of Canada may need to cut rates to stimulate demand and hiring more broadly.
The Canadian economy contracted at a 1.6 percent annualized rate in the second quarter, primarily due to export declines, while inflation remains near the Bank of Canada’s 2-percent target.
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