Canada has now lost 110,000 jobs in two months, and the Bank of Canada must set policy on October 28 with a labour market that is contracting and a headline inflation rate that is not.
Statistics Canada reported on October 9 that employment fell by 68,300 in September after a decline of 41,700 in August. The unemployment rate rose to 6.5% from 6.4%, a two-year low. Analysts polled by Reuters had forecast a gain of 9,200 jobs. For the year to date, Canada has lost a net 41,200 jobs, against a gain of 211,300 in the same period of 2025.
What the Two-Month Reversal Is Telling the Bank of Canada
September was the first full month after a new round of United States tariffs took effect against Canada. Youth employment bore the brunt, with 48,000 fewer jobs among Canadians aged 15 to 24. Quebec lost 49,000 jobs, Ontario 20,000 and British Columbia 20,000, while Alberta added 23,000.
The breadth matters for the policy rate. The losses look like demand weakness and not a single-sector shock, and they arrive at a central bank that has held its overnight rate at 2.25% through every meeting of 2026. Employment is now the freshest data point on the table, ahead of the inflation report due next Monday.
Monthly employment swung from a 75,100 gain in July to losses of 41,700 and 68,300, a two-month decline of 110,000 that is the largest in the 12-month window.
Employment fell in January (-24.8K), February (-83.9K) and April (-17.7K) before the August and September declines; the 2026 total through September is a net loss of 41.2K. Source: Statistics Canada.
Wages at 2.3% Against Inflation at 3.0%
Average hourly wage growth for permanent employees accelerated to 2.3% year over year in September from 2.0% in August, according to Statistics Canada. Continuum Economics expects the September consumer price index, due October 19, to show headline inflation at 3.0% for a third straight month, driven by energy. It expects the three Bank of Canada core measures to edge lower: CPI-Median to 1.9% from 2.0%, CPI-Trim to 1.8% from 1.9% and CPI-Common to 2.5% from 2.6%.
Wages rising 2.3% against prices rising 3.0% means real incomes are falling at the same time as jobs. It also narrows the policy debate. Core inflation near 2% suggests the energy shock is passing through prices and not embedding in them, while the labour data removes the demand-side case for a hike. Reuters reported after the jobs release that money markets no longer price a Bank of Canada increase this month.
The Transmission to Yields and Fixed Mortgage Rates
Bond markets moved before the jobs data. The Government of Canada five-year yield rose from 3.218% on August 25 to 3.685% on September 23, an increase of 47 basis points in a month, with analysts tying the move to high energy prices from the Iran war lifting the odds of a hike. Market odds compiled by LSEG had put the chance of a hold at 94% before the September 2 decision. Fixed mortgage rates are priced off the five-year yield, so a household renewing a five-year term this winter faces a higher base than in August even with the policy rate unchanged.
The Canadian dollar fell 0.44% to 69.99 US cents after the jobs report. The currency, the five-year yield and the policy rate are now pulling in different directions, which is why the guidance in the October 28 Monetary Policy Report carries more weight than the rate decision itself.
The base case is a hold at 2.25% with the 9:45 a.m. ET release. The open question is whether the Bank of Canada tilts toward an eventual hike on energy-driven inflation or toward easing on a labour market that has lost 110,000 jobs in two months. The September CPI on October 19 is the one major data point before the decision, and the October jobs report follows on November 6.