Canada's Economy Just Lost 68,300 Jobs, Wiping Out Every Gain This Year
A stunning miss north of the border
Canada's economy lost a net 68,300 jobs in September, a stunning miss against forecasts for a gain of 9,200. The unemployment rate inched up to 6.5% from 6.4% in August, and the September decline effectively erased every job gain Canada had posted so far this year. Net employment is now down 41,200 year-to-date, compared with a gain of 211,300 over the same stretch of 2025.
The pain was concentrated in the public sector. Educational services and healthcare and social assistance together shed 58,400 jobs, with a smaller number of international students blamed in part for the decline in education roles. Manufacturing, which sits partly in the path of new U.S. tariffs, lost a net 12,700 jobs. Losses were split almost evenly between full-time and part-time positions, and employment among young people aged 15 to 24 fell by 48,000.
September was the first full month after a new round of U.S. tariffs took effect against Canada, though economists said the latest tariffs touch only a small share of U.S.-dependent jobs and are unlikely to move the employment data much in the coming months. The labour-force participation rate fell to 64.8%, its lowest level in 29 years outside the pandemic period, driven by an aging population and slower immigration.
What it means for the Bank of Canada
The report lands right before the Bank of Canada's monetary policy decision later this month. Money markets are no longer pricing in a rate increase in October, though they still expect a 25-basis-point hike in December. Royce Mendes, head of macro strategy at Desjardins, said the deterioration in the labour market means Canadian central bankers will likely need to keep rates unchanged this month, while warning that higher energy prices could force them to tighten soon.
The Canadian dollar weakened after the release, falling 0.44% to C$1.4287 per U.S. dollar. Two-year Canadian government bond yields dropped 9.5 basis points to 2.410%. Meanwhile, wage growth, a closely watched inflation gauge, accelerated to 2.3% year over year in September from 2.0% in August, complicating the central bank's decision.
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How this could hit the options market
A weak Canadian jobs report moves more than the loonie. Watch options flow on Canadian bank ADRs, where rate-path repricing tends to show up fast: TD, RY, and BMO all trade with liquid U.S.-listed options and sit at the intersection of credit quality and the Bank of Canada outlook. If traders start betting that an October hold turns into a longer pause, put premium on the big Canadian lenders could get bid quickly.
Broader Canada exposure is easy to play through EWC, the iShares MSCI Canada ETF, which holds the banks, energy, and railroads that move on Canadian macro. A deteriorating labour market paired with sticky wages is an awkward mix for equities, and volatility on the Bank of Canada decision date is worth tracking on the options chain.
For U.S. traders, the read-through is macro, not single-stock. A cooling Canadian economy adds another data point for the North American slowdown debate. Watch SPY and QQQ positioning around upcoming U.S. jobs data to see if the weakness is spreading.
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