Canada Unemployment Rate Climbs to Six-Month High of 6.7% — 2nd Update

By Robb M. Stewart

OTTAWA--Canada's labor market weakened for a third straight month in October, with the jobless rate climbing to a six-month high as employment slipped and more people hunted for work.

The economy lost a net 4,700 jobs in October and the unemployment rate rose for a second month in a row, advancing 0.2 percentage point to 6.7%, Statistics Canada said Friday.

The modest pullback in employment builds on the 110,000 jobs lost over the previous two months and unwinds a summer recovery. While the unemployment rate remains below the recent peak of 6.9% in April, employment has now fallen by 45,900 in 2026, adding to signs Canada's economy has lost steam and raising further questions about how much further interest rates might rise in response to inflation risk.

Economists had anticipated a slight recovery in the market last month with the addition of about 15,000 jobs holding the unemployment rate steady.

Job losses were concentrated in the private sector, where employment fell by 52,500, the first drop since February. This was softened by the first increase in public-sector jobs in five months, though this coincided with temporary hiring linked to provincial and municipal elections and a referendum in Alberta.

While October marked the second full month since the Trump administration imposed fresh tariffs on imports of Canadian goods, most of the jobs lost were in services-producing industries rather than trade-exposed sectors. Wholesale and retail trade led the retreat, with nearly 29,000 jobs shed to leave employment down by roughly 113,000 from 12 months earlier.

"This was not a reassuring jobs report," said Jessica Hinds, director at Fitch Ratings, who noted timelier surveys suggesting the hiring outlook remains downbeat. "Against this backdrop, we doubt the Bank of Canada will look to tighten policy much further."

The central bank's focus has shifted to increased risks to the outlook for inflation, and Bank of Canada Gov. Tiff Macklem in comments to lawmakers this week reiterated the growth outlook for Canada has improved despite continued U.S. trade actions.

The bank has forecast growth will cool in the fourth quarter as new tariffs weigh, then pick up again in 2027 as consumers continue to spend and as business investment strengthens. However, recent data indicates a soft handoff to the final quarter of the year, with gross domestic product stalling in both July and August and estimated to have contracted 0.1% from the month before in September.

Canada's labor force survey contrasts with solid jobs data out of the U.S., where 165,000 jobs were added in October and the unemployment rate eased to 4.1%. When calculated using U.S. Labor Department methodology, Canada's unemployment rate slipped 0.1 percentage point to 5.5%.

The Canadian currency fell against the U.S. dollar following the data, and Canadian bond yields declined as investors pared back expectations for future interest rate increases. Currently, markets are pricing in a roughly 80% chance of a rate increase in January, after the central bank last month raised its policy rate for the first time in more than three years.

"This morning is a confirmation that the road to more Bank of Canada hikes will not be as clear as markets have it," said Sebastien Mc Mahon, chief economist at iA Financial Group. "We now expect the Bank of Canada to change its message and sound more balanced about inflation risks moving forward."

The layoff rate in Canada continues to hold steady, yet just under one in five Canadians without a job in September found work in October, with a job-finding rate of 18.9% trailing the 19.8% rate seen 12 months prior and also coming in below the 24.6% average from 2017 to 2019, before the Covid-19 pandemic.

Statistics Canada said that, among the 1.5 million people who were unemployed in October, almost 24% were in what is considered long-term unemployment, meaning they have been continuously searching for work 27 weeks or more. That is above nearly 22% a year earlier and the prepandemic average of 17.2%.

Not all analysts expect the Bank of Canada to shift its thinking, particularly after its inflation-targeting framework was renewed without prior references to securing maximum employment.

"The bank has been focused on energy prices, which have come down somewhat but remain elevated," said Daniel Hyun, senior economist at KPMG Canada. "Our assumption is that they will hike again in December based on their framework and worry about inevitable and potentially large energy-price pass-through, but would hope that they take a pause to give the economy more room to breathe."

Write to Robb M. Stewart robb.stewart@wsj.com

(END) Dow Jones Newswires

November 06, 2026 11:25 ET (16:25 GMT)