The jobs argument in Canada now runs straight into the interest-rate argument. On Wednesday, the Bank of Canada raised its policy rate to 2.50 percent — its first increase since 2023 — to stop high energy prices from spreading into prices across the economy. It acted with a weakening job market in front of it: the September survey showed the economy shedding jobs for a second straight month, 110,000 gone in two months, in the middle of Canada's trade war with the United States.
The September numbers, released on October 9, were far worse than expected. Employment fell by 68,300, after a loss of 41,700 in August; economists had expected a small gain of about 10,000 jobs. The unemployment rate rose to 6.5 percent from 6.4 percent. The participation rate fell to 64.8 percent, its lowest since December 1997 outside the pandemic, a drop Statistics Canada attributes largely to an aging population. Average hourly wages rose 2.3 percent to $37.64, and employment is still 95,000 higher than it was a year ago. Two straight monthly declines have wiped out more than half of the 181,000 jobs added between April and July.
Where the jobs went is the part of the report that cuts against every easy explanation. The public sector shrank by 70,000 — its fourth straight monthly fall — led by educational services, down 35,000, and health care and social assistance, down 23,000. Manufacturing lost 13,000; the private sector was flat, though still 163,000 jobs larger than a year ago. Young Canadians took the hardest hit: employment for 15-to-24-year-olds fell by 48,000, and youth unemployment stands at 13.0 percent. Quebec alone lost 49,000 jobs, British Columbia 20,000 and Ontario about 20,000, while Alberta added 23,000. September was the first full month of the latest round of American tariffs — but the month's losses were led by classrooms and hospitals, not factory floors, and no official reading pins the whole drop on the trade war.
Conservative leader Pierre Poilievre answered the numbers the same day, standing in Burlington across the harbour from the Stelco steel works, where up to 500 workers face layoffs. He demanded that Ottawa sue Stelco's American owner, Cleveland-Cliffs, to enforce the job commitments from its takeover approval — the first point of a five-point plan covering steel dumping, industrial carbon pricing, LNG approvals and a tariff-free U.S. deal. Industry Minister Mélanie Joly has already threatened the company with enforcement. Poilievre also turned the jobs figure on the coverage itself: "the last year and a half, the media has asked about me, but they don't ask Prime Minister Carney about the people that left his caucus, the people that are losing their jobs." Four days later he was in Detroit, pitching a tariff-free auto pact to American television viewers.
Carney's answer is the transition itself, and he has never pretended it would be quick. He called off trade talks with Washington in August, saying the Americans "asked too much and they offered too little," and his government is pushing Canadians toward new markets — this week he is hosting the Canada-European Union summit in Montreal, the diversification strategy in action. The warning was built into his plan from the start. In his pre-budget address, he told Canadians: "I will always be straight about the challenges we have to face and the choices we must make. To be clear, we won't transform our economy easily or in a few months — it will take some sacrifices and some time." More than three-quarters of Canada's exports go to one country, Washington has raised tariffs to levels last seen during the Great Depression, and as he put it, "we can't rely on one foreign partner." His promise, stated as his government's claim, is $300 billion in added trade from doubling non-U.S. exports over a decade — an economy no single foreign partner can squeeze.
The Bank of Canada's hike lifts the prime rate to 4.70 percent, raising borrowing costs while hiring cools — TD Economics called the increase "premature," pointing to weak wage growth and the new American auto tariffs due in January, when President Trump has threatened to double the levy on Canadian-built vehicles to 50 percent. Economist Trevor Tombe estimates nearly 90,000 more Canadian jobs could be lost if the newest 50 percent American duties stay in place, because, as he writes, "where a tariff lands is not the same as where its costs are felt." Critics say the pain is arriving now and the gains are years away; the government says waiting on Washington is the truly expensive option.
The next three dates will test both claims: the October jobs report on November 6, the federal budget on November 4, and the Bank of Canada's next decision on December 9 — with the threatened January 1 auto tariff behind all of them. Canada is two months into a jobs slide, its central bank is raising rates anyway, and its prime minister is asking Canadians to accept a weaker present in exchange for an economy that no longer rises and falls on decisions made in Washington.
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