Public-sector employment fell by 70,000, the fourth monthly drop in a row, while participation hit its lowest since 1997 outside the pandemic. The loonie weakened to a 52-week low against the dollar 19 days before the Bank of Canada decides.
October 9, 2026
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Canada's headline jobs number was a shock. The pieces underneath it point in different directions.
Employment fell by 68,000, or 0.3%, in September, Statistics Canada said on Friday. Economists had expected a gain of about 10,000. It was the second straight monthly decline after a loss of 42,000 in August, bringing the two-month total to about 110,000. The unemployment rate rose a tenth of a point to 6.5%, and the employment rate slipped to 60.6%.
Who lost work
The losses were concentrated in government. Public-sector employees fell by 70,000, or 1.5%, the fourth consecutive monthly decline, and are down 119,000 from a year earlier. Private-sector employment was "little changed for a second consecutive month," the agency said, and remains up 163,000, or 1.2%, from a year ago.
By industry, educational services shed 35,000 jobs. Health care and social assistance lost 23,000, its first monthly decrease since December 2022. Manufacturing fell by 13,000. Full-time and part-time work dropped by similar amounts, 35,000 and 33,000.
Young people took a large share of the hit, with youth employment down 48,000. By province, Quebec lost 49,000 jobs and British Columbia and Ontario 20,000 each, while Alberta added 23,000.
What did not move
Two indicators that usually deteriorate in a downturn held steady. The layoff rate was 0.7%, close to the 0.6% of a year earlier and of the 2017 to 2019 average. And average hourly wages rose 2.3% from a year earlier, up from 2.0% in August.
Participation in the labor force fell to 64.8%, the lowest since December 1997 if 2020 is excluded. Statistics Canada attributed the decline over the past year largely to an aging population.
Currency and rates
The Canadian dollar weakened. The U.S. dollar traded at about 1.427 Canadian dollars in early afternoon, up about 0.3%, after touching 1.4298, above its previous 52-week high. Canada's two-year government bond yield fell about 9.5 basis points to near 2.41% as traders pared bets on Bank of Canada tightening. Money markets priced no increase at the Oct. 28 decision and continued to expect a quarter-point move in December.
The Bank of Canada's benchmark rate has been 2.25% for about a year. The U.S. Federal Reserve, by contrast, raised rates in September, and the gap between the two policy paths has been one of the forces behind the loonie's slide.
Opposing readings
One reading is that Canada's labor market is rolling over. Two months of losses total about 110,000 jobs, health care has started cutting, the employment rate is falling, and the currency is at a 52-week low.
Another is that the decline is concentrated and partly structural. Government payrolls account for more than the entire September drop, private hiring is flat rather than falling, layoffs are normal, participation is falling with demographics, and wage growth accelerated. On that view, the data do not argue strongly against a rate increase.
Next markers
The Bank of Canada announces its decision on Oct. 28, with its quarterly forecasts. October payrolls arrive on Nov. 6. A third month of losses that spread into private employers would change the picture; a rebound in public-sector hiring would suggest September was a one-off.