41,000 Jobs Lost in July as Unemployment Holds at 6.9%

The Canadian economy lost about 41,000 jobs in July, with young workers and private-sector employees bearing the largest share of the decline, Statistics Canada reported on Friday. The unemployment rate remained unchanged at 6.9% as the number of people looking for work was roughly the same as in June. Full-time employment fell by 51,000 positions in July, and the agency said most of the losses occurred in the private sector. This decline partially offset the unexpected gain of 83,000 jobs recorded in June.

Weakest jobs report in three years dampens start to third quarter

Economists had been expecting a small increase in employment ahead of the release, so the July results were a disappointment. Doug Porter, chief economist at BMO, described the report as the weakest in three years on the bank’s internal scorecard and noted that total hours worked fell 0.2% in July. That decline points to a soft start to the third quarter for Canada’s economy.

TD Bank senior economist Leslie Preston emphasized that the labour force survey can be volatile month to month and that the unemployment rate remains the most important single indicator to watch. However, she warned that the steady unemployment rate in July was the result of falling labour force participation, which is not encouraging. Preston said the stagnation in labour force growth is expected to persist, which could prevent the unemployment rate from rising sharply even if demand for labour softens.

Youth employment was hit especially hard. Workers aged 15 to 24 saw a drop of 34,000 positions in July, and the employment rate for that age group fell to 53.6% — the lowest level outside the pandemic since November 1998, according to Statistics Canada. Several industries recorded job losses in July, led by information, culture and recreation, which shed 29,000 positions, and construction, which lost 22,000 roles. Those sectoral declines help explain why overall private-sector employment fell so noticeably over the month.

Trade-sensitive industries show signs of life amid U.S. tariff pressures

Not all sectors weakened in July. Transportation and warehousing added 26,000 jobs, marking the sector’s first monthly increase since January and providing a partial offset to broader losses. This industry is closely tied to demand for exports and has seen some disruption from recent U.S. tariff actions, so the uptick is noteworthy.

Manufacturing, another industry sensitive to trade conditions and tariffs, recorded a modest gain for the second consecutive month, adding 5,300 positions in July. Despite these consecutive increases, manufacturing employment remains down year over year by 9,400 jobs, highlighting ongoing pressures in the sector.

Statistics Canada reported that the layoff rate — the share of people employed in June who were laid off in July — was essentially unchanged at 1.1% compared with the same month a year earlier, despite heightened uncertainty related to trade tensions and tariffs. Nevertheless, the agency noted that many job seekers are finding it difficult to secure employment.

BoC to weigh weak jobs data ahead of interest rate decision

Of the roughly 1.6 million Canadians who were unemployed in July, 23.8% had been searching for work for 27 weeks or more, placing them in long-term unemployment. Statistics Canada said this is the highest share of long-term joblessness since February 1998 when excluding the pandemic period. On the wage front, average hourly earnings rose 3.3% on an annual basis in July, a modest increase from June.

The Bank of Canada will consider the strength of the labour market as it prepares for its next policy decision on Sept. 17. The central bank left its policy interest rate unchanged at 2.75% in its most recent decision the previous week. CIBC senior economist Andrew Grantham said the weaker-than-expected employment numbers bolster his view that the Bank of Canada could opt for a quarter-point rate cut at its September meeting. Policymakers will also review another month of jobs data for August, upcoming inflation reports and a quarterly GDP update before making their next move.

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