September job losses pour cold water on Bank of Canada rate hike chatter

September now marks the steepest single month of job losses since February.

“There’s no way to sugar coat it. It’s a very bad jobs print for September and it follows up a bad print in August,” said Robert Kavcic, senior economist at BMO Capital Markets.

The only saving grace for the labour market, Kavcic noted, is that employers had been expanding their payrolls at a solid clip earlier in the year.

Before recent weakness, employers had collectively added 181,000 positions from April through July. Employment was up 95,000 positions compared with last September.

Smoothing out the often-volatile job figures over the past six months paints a picture of modest but steady gains, Kavcic said.

“It’s not a good sign going into the fourth quarter, but if you step back and ignore some of the month-to-month noise, it does look like the job market is holding in relatively well.”

Signs of stability in the private sector — despite four straight months of declines in public sector employment — were also reassuring to economists.

The educational services sector led the declines with a loss of 35,000 positions last month, followed by the health care and manufacturing industries. September, meanwhile, recorded a gain of 17,000 jobs from a segment that includes repair, maintenance and other household and personal services.

Young workers aged 15 to 24 bore the brunt of the losses last month with 48,000 fewer jobs, though women aged 25 to 54 also saw employment levels fall.

Provincially, Quebec stood out with a loss of 49,000 jobs last month, while Ontario and British Columbia both shed 20,000 positions. Alberta added 23,000 roles.

The September jobs report is one of the first major economic releases since the trade dispute between Canada and the United States ratcheted back up.

Despite job losses in manufacturing, most economists weighing in Friday were not ascribing too much tariff weight to the data.

“Most September losses came from non-trade-facing sectors and from educational services for Quebec in particular, so it would be premature to blame tariffs for the weakness,” said Daniel Hyun, senior economist at KPMG Canada, in a note.

Kavcic said pressure from tariffs will likely keep hiring at a subdued pace heading into the fourth quarter.

The September jobs figures mark the Bank of Canada’s last look at the labour market before its next interest rate decision set for Oct. 28.

The central bank’s policy rate has been at 2.25 per cent for nearly a year. Most economists consider that rate to be slightly stimulative to the economy.

TD Bank senior economist Andrew Hencic said in a note to clients that two months of weak labour market figures between Bank of Canada decisions will pour cold water on calls for interest rate hikes.

While the central bank has been guarding against both tariff-induced economic weakness and price hikes from the war in the Middle East, Hencic said monetary policymakers have signalled lately they’re more concerned about bubbling inflationary pressures.

TD expects the Bank of Canada to remain on hold this month as new tariffs take some steam out of the economy and keep inflation in check.

Financial market odds of a quarter-point hike from the Bank of Canada this month fell to roughly 25 per cent as of Friday afternoon, down from around 40 per cent before the latest jobs data, according to LSEG Data & Analytics.

Hyun said the soft labour report casts a bit of doubt on KPMG Canada’s call for a quarter-point hike in December. But for now the firm’s economists still expect the central bank will push back against inflation risks by raising its policy rate to 2.5 per cent to end the year.

Kavcic said that, zooming out, the broad weakness in the labour market does not call for higher rates.

“These reports in August and September push back pretty hard against the Bank of Canada raising rates right now in the short term,” he said.

If the central bank does hike, he said, it will be on the back of trends in inflation data.

Even then, it will take a few bad inflation reports in a row for the bank to move off its stand-pat stance and back into a tightening cycle, Kavcic argued.

Also on Friday, the Canadian dollar fell to its lowest point against the U.S. greenback since early 2025. The loonie dipped briefly below 70 cents US before recovering somewhat.

This report by The Canadian Press was first published Oct. 9, 2026.

Craig Lord, The Canadian Press

by The Canadian Press

September job losses pour cold water on Bank of Canada rate hike chatter

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