Canada sheds 68,000 jobs in September; unemployment rises to 6.5%

Canada's labour market shrank for a second month in a row in September 2026. Statistics Canada's Labour Force Survey, released on Friday, October 9, 2026, showed that employment fell by about 68,000 jobs, or 0.3 per cent, and that the unemployment rate rose by 0.1 percentage point to 6.5 per cent. The fall was concentrated in the public sector and among young people, and it came as a surprise: economists had expected a small gain of around 9,200 jobs. The weak report knocked the Canadian dollar to an 18-month low and cut market bets that the Bank of Canada would raise interest rates at its next decision on October 28.

Canada had entered the autumn with policymakers weighing whether rising prices might call for a rate increase. Before the jobs data, markets put the chance of a hike in October at around 40 per cent. After the release, that estimate fell to about 25 per cent, and several economists said the figures had taken an October move off the table. Markets were still pricing in some chance of a quarter-point increase in December, but the central bank now faces a labour market that is clearly softening while inflation pressures have not gone away.

The make-up of the losses is unusual. Much of the public debate in Canada this year has been about the damage from US tariffs, yet the largest single source of job cuts in September was the public sector, not export industries. Manufacturing did shed jobs, but on a far smaller scale than schools, hospitals and social services. Economists quoted after the release generally argued that tariffs were not the main driver of the September drop. That points to tighter government budgets and slower hiring in services as forces that could keep weighing on employment in the months ahead.

Youth employment is the other weak spot. With young workers taking about seven in ten of the lost jobs, students and recent graduates looking for part-time or entry-level work face a tougher market. For Indian readers, this matters because Canada remains a major destination for Indian students and young migrants, many of whom rely on exactly this kind of work while they study or settle in.

For currency markets, the report adds to pressure on the Canadian dollar, which fell to its weakest level in about 18 months after the data. A weaker currency makes Canadian exports cheaper but raises the cost of imports and of money sent abroad from Canada.

Short-term: The chance of a Bank of Canada rate increase on October 28 has fallen sharply, and the Canadian dollar has weakened. Job seekers, especially young people, face fewer openings in public services.

Long-term: If job losses continue into the final quarter, the central bank may have to keep rates on hold for longer despite price pressures, and Canada's growth outlook for 2027 could be revised down.

Who is affected: Public sector workers in education and health, young job seekers and students, Quebec and British Columbia residents, borrowers watching interest rates, exporters and importers, and families who send or receive money from Canada.

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