Canada’s economy unexpectedly lost 42,000 jobs in August, a sharp break from July and a number that landed well below economists’ calls for a gain of 15,000. The drop came as the Bank of Canada held its benchmark rate at 2.25 per cent for the seventh time in a row, leaving policymakers and investors to weigh a labour market that has clearly lost some of its recent strength.
Andrew Grantham said the labour market cooled in August after a hot July, and that the economy gave back more than half the jobs it added the month before. That matters now because the labour data arrived just as many economists were watching for signs that the central bank might need to stay cautious about rates, not move toward a more hawkish stance.
Grantham wrote on Friday that the latest print fits with other signs the economy is slowing again in quarter three after a strong second quarter. He pointed to exports and monthly gross domestic product as part of that picture, and said heightened uncertainty around U.S. trade is still hanging over the outlook. In plain terms, the job market is no longer moving in a straight line. July was hot. August was not.
The friction is that the August loss was not a small miss at the margins. It was a reversal against a market that had expected hiring to continue, even modestly, and it came after the Bank of Canada had already chosen caution again this week. CIBC still expects the bank to hold interest rates, but the latest employment data gives that view a weaker labour-market backdrop to lean on.
What this means next is less about a single month than about whether August turns out to be the start of a softer stretch or just a rough patch after July’s strength. For now, the clearest answer is that unemployment pressure is not fading cleanly, and the case for the Bank of Canada to turn more aggressive has gotten harder to make.
