Canada’s Labor Market Gains Mask Deeper Weakness
Central Bank Chief Cautions Against Reading Too Much Into Data
Key Takeaways:
- Bank of Canada Governor Tiff Macklem said Oct. 17 that Canada’s labor market remains “soft” despite adding 60,400 jobs in September.
- Macklem cited rising unemployment at 7.1% and weak hiring outside tariff-hit sectors as signs of economic uncertainty and soft growth in the second half of 2025.
- The central bank will release new projections in its Oct. 29 policy report, with markets pricing in better than 50% odds of an interest rate cut.
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Bank of Canada Governor Tiff Macklem said he sees the Canadian labor market as “soft” despite recentdatathat showed the country added 60,400 jobs in September.
In a callback to media from Washington, where he was attending meetings of the International Monetary Fund and World Bank, Macklem noted the employment gain last month only partially reversed a job loss of more than 100,000 positions the previous two months, and called the data “volatile.”
“The labor market, and the economy in general, it’s not down sharply, but it is certainly soft,” he said Oct. 17, also pointing out the unemployment rate has risen to 7.1% from 6.6% at the start of the year.
“You’ve seen job losses in the heavily tariffed sectors. In the rest of the economy, you’re really seeing very soft hiring. I think that’s consistent with the fact that firms are feeling the uncertainty.”
The Bank of Canada next sets rates on Oct. 29. Before Macklem’s comments, traders in overnight swaps put the odds of a rate cut at over 50% at that meeting.
Macklem said the central bank is expecting soft growth in the second half of the year after acontractionin the second quarter. There was surprisinglystrong consumptionbetween April and June, but that’s likely to ease in the coming data prints, he said.
The bank will release a base projection in its October monetary policy report for the first time since January. The forecast will “look forward against the background of heightened uncertainty,” Macklem said.
“We will need to be humble about our forecasts and we will continue to put a lot of emphasis on the risks,” he said.
Statistics Canada reports inflation on Oct. 21. On a yearly basis, headline inflation is close to the 2% target, but some core measures remain elevated. Still, the bank has repeatedly faded its so-called trim and median gauges, saying instead that underlying price pressures are rising at a 2.5% annual pace.
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