Average hourly wages among employees increased 3.3% (+$1.17 to $36.78) on a year-over-year basis in September, following growth of 3.2% in August (not seasonally adjusted).

The surprisingly strong job gains suggest Canada’s job market is showing some resilience to tariff disputes with the US. The jump in factory employment, although not driven by autos, suggests the sector may benefit from some exporters’ exemption from levies under the Canada-US-Mexico trade Agreement.

The loonie surged in response to the news as shorter-term interest rates rose. The report reduces expectations for a rate cut when the Bank of Canada meets again on October 29, with traders putting the odds at about 25%, down from 70% before the data release. However, the better-than-expected job gains did not fully offset the losses posted in July and August, as Canada shed a net 45,900 jobs over the third quarter, the weakest quarter since the pandemic.

Total hours worked fell 0.2% last month, and the labour force rose by 72,300.

Employment in manufacturing rose in September (+28,000; +1.5%), the first increase since January. The gain was concentrated in Ontario (+12,000) and Alberta (+7,900). Before the rise in September, employment in manufacturing had recorded a net decline of 58,000 (-3.1%) from January to August.

Employment change by industry, September 2025

Employment was also little changed in Ontario in September. The unemployment rate in the province increased by 0.2 percentage points to 7.9% in September, as more people searched for work. The unemployment rate in the province was up 0.8 percentage points from September 2024. In the CMA of Toronto, the unemployment rate was unchanged at 8.9% in September 2025 and was up 0.8 percentage points on a year-over-year basis (three-month moving averages).

Bottom Line

The Bank of Canada has made it clear that it will focus on inflation as well as on increasing slack in the economy, and a September cut may still hinge on the consumer price index released next week. Labour markets are still softer than they were a year ago. The unemployment rate held steady at 7.1% in September, but it remains up half a percent from a year ago. International trade data softened in August, and U.S. tariffs remain a significant threat to the economic outlook.

It is doubtful that Bank of Canada policymakers thought in September that just one cut in the overnight rate would be enough to address economic weakness, and the labour force data today probably isn’t positive enough alone to derail another cut in October.  Still, the Bank of Canada will also have to take into account the next round of inflation data – and future cuts beyond October would be less likely if government deficit spending ramps up as expected to help address tariff-related economic weakness.

The central bank is well aware that the Labour Force Survey is notoriously volatile, and the jobless rate at 7.1% is still up half a percentage point from a year ago. The underlying details of the report were not as positive. Actual hours worked declined despite the surge in full-time employment. And permanent layoffs ticked higher. But other sectors have remained broadly resilient. Services employment was up 18k month-over-month and 225k year-over-year last month. All eyes will be on the CPI data next Tuesday.