Weak August Jobs Report Boosts Odds of a Bank of Canada Rate Cut

Canada’s August Labour Force Survey came in weaker than expected, adding weight to the case for another Bank of Canada (BoC) rate cut later this year.

Employment Trends

• Employment fell by 66,000 jobs (-0.3%) in August, on top of July’s 41,000 job loss.
• The decline was led by part-time work (-60,000), while full-time employment held steady.
• Self-employment also dropped by 43,000 (-1.6%), continuing a downward trend seen in recent months.

The employment rate slipped to 60.5%, the second straight monthly decline, and overall participation in the labour force edged lower as well.

Regional & Sector Impacts

• Ontario, Alberta, and B.C. saw the steepest losses.
• B.C. shed 16,000 jobs with unemployment rising to 6.2%.
• Alberta dropped 14,000 jobs, pushing its unemployment rate up to 8.4%, the highest since 2017 (excluding pandemic years).
• Ontario employment fell 26,000, though its unemployment rate eased to 7.7% as fewer people looked for work.
• Job losses were concentrated in professional services (-26,000), transportation (-23,000), and manufacturing (-19,000). Construction was a rare bright spot, adding 17,000 jobs.

Youth & Student Employment
Students faced particular challenges: the unemployment rate for returning students aged 15–24 averaged 17.9% this summer, the highest since 2009 (excluding 2020).

Wages & Hours
Despite fewer jobs, average hourly wages continued to rise, up 3.2% year-over-year to $36.31, while total hours worked were essentially unchanged.

What This Means for Rates
Financial markets reacted quickly: bond yields fell, the Canadian dollar weakened, and traders boosted the odds of a BoC rate cut in September to 85%. The central bank has emphasized inflation as its key focus, meaning the final call will likely hinge on the upcoming CPI report.

U.S. Labour Data Adds Pressure
The U.S. also reported a soft jobs report in August, with payroll growth stalling and unemployment ticking up to 4.3%. This has strengthened expectations for a Federal Reserve rate cut on September 17.

The Bottom Line
Canada’s job market is clearly softening, and combined with rising unemployment in key provinces, the pressure is mounting on the Bank of Canada to lower rates. If inflation data co-operates, we could see another cut as early as this month — a shift that would directly influence mortgage rates and housing affordability heading into the fall.