Statistics Canada’s Labour Force Survey for September points to a labour market that has lost momentum. Employment fell for a second consecutive month, the unemployment rate edged higher and hiring remains slow. However, the weakness is concentrated in the public sector, and the regional picture is sharply divided, with Alberta accounting for most of the job gains over the past year.
A rough patch for the labour market
Employment unexpectedly fell by 68,300 in September, following a decline of 41,700 in August, bringing total job losses over the past two months to about 110,000. The unemployment rate edged up to 6.5 per cent, while the participation rate fell to 64.8 per cent, its lowest level since 1997 outside the pandemic period, partly reflecting population ageing. Job losses were split between full-time (-35,400) and part-time (-32,900) positions. Hours worked fell 1.5 per cent month over month, a steeper decline than employment, suggesting a further pullback in economic activity in the month.
| Indicator (seasonally adjusted) | September 2026 | Monthly change | Year-over-year |
| Employment | 21,105,000 | -68,000 (-0.3%) | +95,000 (+0.5%) |
| Unemployment rate | 6.5% | +0.1 pt | Peak 6.9% in April |
| Participation rate | 64.8% | -0.2 pt | -0.4 pt |
| Employment rate | 60.6% | -0.2 pt | Unchanged |
| Full-time employment | — | -35,000 (-0.2%) | — |
| Part-time employment | — | -33,000 (-0.9%) | — |
| Public sector employees | — | -70,000 (-1.5%) | -119,000 (-2.6%) |
| Private sector employees | — | Little changed | +163,000 (+1.2%) |
| Self-employed | — | -23,000 (-0.8%) | +51,000 (+1.9%) |
| Average hourly wages | $37.64 | — | +2.3% (Aug: +2.0%) |
Source: Statistics Canada, The Daily, 2026-10-09. NSA = not seasonally adjusted.
The decline was led by the public sector (-70,000) and self-employment (-22,500), while private-sector employment was little changed (+24,100, a statistically insignificant increase). At the industry level, losses were concentrated in educational services (-35,300), health care (-23,100) and manufacturing (-12,700).
Over the past year, public-sector employment has fallen by 118,700, mostly in educational services, while the private sector has added 163,000 jobs.
Average hourly wages rose 2.3 per cent year over year, up from 2.0 per cent in August. The Bank of Canada is likely to view subdued wage growth as a sign of continued economic slack and a factor helping to offset inflationary pressures from higher energy prices.
Alberta carries the national numbers
Alberta has created 75,700 jobs over the past year, accounting for almost 80 per cent of Canada’s total employment gain of 94,900 jobs. That’s a striking contribution for a province that accounts for about 12.5 per cent of the national labour market. Two main factors help explain this divergence: significantly lower effective U.S. tariffs on its exports than those faced by Quebec, Ontario and B.C., leaving Alberta much less affected by the trade war; and faster population growth (1.5 per cent year over year, compared with 0.5 per cent nationally, 0.3 per cent in Ontario and 0.1 per cent in B.C.). About 45 per cent of Alberta’s job gains were in health care. Despite higher oil prices boosting confidence, employment in Alberta’s natural resource extraction sector is about 10,000 below year-ago levels.
In September, employment losses were concentrated in Quebec (-49,400), B.C. (-20,200) and Ontario (-20,000), while Alberta added 23,100 jobs. Ontario’s unemployment rate stands at 7.0 per cent. At the census metropolitan area (CMA) level, labour market stress is concentrated in Ontario’s manufacturing and commuter markets and parts of B.C. Unemployment is highest in Kelowna (9.3 per cent), Oshawa (8.9 per cent), London (8.4 per cent) and Kitchener-Cambridge-Waterloo (7.7 per cent). Employment has fallen the most over the past year in London (-5.9 per cent), Quebec City (-5.7 per cent) and Victoria (-5.0 per cent).
Implications for the Bank of Canada
The economic outlook remains uncertain, with a weak labour market and slower growth likely in the coming months. However, high fuel prices risk fuelling broader inflationary pressures. With the policy rate at 2.25 per cent, markets had been leaning toward a rate hike. Following the employment report, the odds of an October increase fell to about 27 per cent, although a December hike remains largely priced in.
As the Bank of Canada weighs these risks, we believe it will opt for patience. We expect the Bank to hold its policy rate at its Oct. 28 meeting and keep it unchanged for the rest of the year, unless the September CPI report, due Oct. 19, points to a broader pickup in inflation.
Sources: Statistics Canada, The Daily (2026-10-09); internal economic commentary.
Independent Opinion
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