Labour market offers yet another clue as to the state of Canada's recovery
Canada's labour market shed 42,000 jobs in August 2026, reversing a cumulative gain of 181,000 positions recorded from April through July, according to Statistics Canada's Labour Force Survey released September 4, 2026. The unemployment rate held steady at 6.4 per cent, while the employment rate fell 0.1 percentage points to 60.8 per cent.
The decline followed Canada's economy posting annualized real GDP growth of 3.3 per cent in the second quarter of 2026 — the fastest quarterly pace since early 2023, according to Statistics Canada.
The August employment data arrives roughly two weeks after new US tariffs on Canadian goods came into force. The United States began imposing 50 per cent tariffs on Canadian goods on August 22, 2026. In response, Canada announced it would impose tariffs ranging between 15 and 50 per cent on US-origin goods, effective September 8, 2026, with Canadian countermeasures expected to affect approximately $20 billion in US annual exports to Canada.
Industry and regional breakdown
Employment declined in business, building and other support services (-20,000; -2.8%), public administration (-8,800; -0.7%), natural resources (-7,700; -2.3%) and utilities (-5,600; -3.5%) in August. Manufacturing was the only sector to record a significant increase, gaining 22,000 positions (+1.2%), with most of that increase (+14,000; +1.7%) in Ontario.
The number of public sector employees fell by 20,000 (-0.4%) in August, down for the third consecutive month. Since May, the number of public sector employees has declined by 78,000 (-1.7%).
Geographically, employment declined in Quebec (-19,000; -0.4%) and edged down in Ontario (-18,000; -0.2%). The decline in Quebec was concentrated in the census metropolitan area of Montréal (-21,000; -0.9%). Quebec was the only province to record a year-over-year employment decline, down 54,000 (-1.2%) from August 2025. New Brunswick posted a gain of 2,400 (+0.6%).
Tariff exposure and layoff trends
Statistics Canada noted that 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. Over the 12 months to August, the layoff rate averaged 0.9 per cent for workers in industries dependent on US demand for exports, compared with 0.7 per cent for other industries over the same period.
The overall layoff rate was 0.8 per cent in August, slightly below the rate of 1.0 per cent observed 12 months earlier and similar to the average layoff rate of 0.9 per cent observed for the corresponding months from 2017 to 2019.
The August job loss stands in contrast to the labour market trajectory that had emerged in the preceding months. Canada's unemployment rate fell to 6.6 per cent in May 2026 from 6.9 per cent the previous month, with net employment surging by approximately 88,000 — the sharpest monthly gain since December 2024. That rebound followed a difficult start to the year: employment fell by 83,900, or 0.4 per cent, in February 2026, the sharpest single-month decline since January 2022, with losses concentrated in full-time positions.
Wage growth at lowest since 2017
Average hourly wages among employees were up 2.0 per cent year over year in August to $37.02, following growth of 2.8 per cent in July and 3.3 per cent in June (not seasonally adjusted). Wage growth in August 2026 was the slowest since November 2017, excluding the year 2021 during the COVID-19 pandemic.
The deceleration was more pronounced at the lower end of the income distribution. Employees in the bottom 25 per cent of the wage distribution saw average hourly wages rise 1.1 per cent year over year to $18.66, while those in the second-lowest quartile gained 1.3 per cent to reach $26.61. Employees in the top two quartiles each saw wage growth of 2.1 per cent.
Youth and core-aged workers
Employment among youth aged 15 to 24 fell by 19,000 (-0.7%) in August, and the youth unemployment rate edged up 0.3 percentage points to 12.9 per cent — 1.4 percentage points lower than a year earlier but above the pre-pandemic average of 10.8 per cent recorded from 2017 to 2019.
The summer job market showed some improvement for returning students. The unemployment rate for returning students aged 15 to 24 averaged 15.9 per cent from May to August 2026, down from 17.9 per cent during the same period in 2025.
Among core-aged workers, the unemployment rate for men aged 25 to 54 rose 0.2 percentage points to 6.0 per cent, while the rate for core-aged women fell 0.2 percentage points to 5.0 per cent. The employment rate for core-aged women declined 0.3 percentage points to 80.9 per cent in August but remained 1.5 percentage points above August 2025 levels and above the pre-pandemic average of 79.1 per cent observed from 2017 to 2019.
