‘Sour’ job report could give Bank of Canada breathing room on rate hikes, economists say

The Bank of Canada is now in a tricky spot as it tries to juggle rising inflation and slowing growth, economists say, after the country lost 68,000 jobs and the unemployment rate rose to 6.5 per cent in September from 6.4 per cent in August.

Economists tracked by Bloomberg had expected the economy to add 10,000 positions last month, but the jobless rate matched their calls.

The employment drop in September was the second consecutive decline, following a loss of 42,000 positions in August.

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Here’s what the latest employment numbers mean for the economy, the Bank of Canada and interest rates .

“The jobs count has become even more volatile than usual,” Douglas Porter, chief economist at Bank of Montreal, said in a note on Friday, pointing to a similar two-month loss of positions at the start of 2026, which was followed by gains from the spring into the summer.

He said employment has risen 0.5 per cent from a year ago, which is a better guide of what’s happening, but the number of people looking for work dropped, helping to keep the jobless rate from rising higher and it’s still down from 7.1 per cent a year ago.

Porter gave the job report a grade of 22.5 out of 100, but said a mitigating factor was that more than half of the decline came from the education sector. Private-sector employment rose in September.

“September is always going to raise questions about seasonal adjustment amid the restart of school,” he said.

But he said the drop in education jobs could also reflect the ongoing pullback in international students, as the sector is down 4.2 per cent year over year.

Manufacturing also lost nearly 13,000 positions last month, a possible early warning from increasing trade tensions.