Canada’s unemployment rate rose to 7.1% in August, the highest in more than nine years outside of the pandemic, adding pressure on the Bank of Canada to deliver an interest rate cut later this month. Statistics Canada reported Friday that the economy shed 66,000 jobs in August, largely in part-time positions. Professional and technical services led the declines, while trade-sensitive sectors such as transportation, warehousing, and manufacturing also posted steep job losses. Economists raise odds of rate cut CIBC senior economist Andrew Grantham said the latest data shows the weakness is no longer confined to sectors hit by U.S. tariffs. “The weaker than expected employment report saw financial markets pricing in a greater probability of a September interest rate cut, resulting in a decline in bond yields,” he told clients. The Bank of Canada’s next policy decision is set for Sept. 17. The central bank has kept its key rate at 2.75% over the past three meetings, citing trade uncertainty and sticky inflation. However, the jobs report adds to last week’s data showing GDP contracted by 1.6% annually in the second quarter, with only a slight 0.1% rebound estimated for July. August marked a second straight month of job losses, following a decline of 41,000 in July. The number of unemployed rose by 34,000, pushing the layoff rate to 1%, up from 0.9% a year earlier. BMO chief economist Douglas Porter noted the economy has lost 38,500 jobs since the trade war began in January, including 58,100 manufacturing roles. Inflation pressures shape policy outlook Inflation could be the deciding factor. The consumer price index rose 1.7% in July, though core measures remained elevated, with a three-month average of CPI-trim and CPI-median at 2.4%. RBC economist Claire Fan said the August inflation report, due a day before the rate decision, will “bear an unusual amount of weight” in shaping policy. Meanwhile, Canada’s employment rate fell 0.2 points to 60.5%in August, while annual wage growth eased to 3.2%. Youth unemployment stood at 14.5%, with summer student joblessness at 17.9%—the highest since 2009. Regionally, Alberta’s unemployment rate rose to 8.4%, while B.C.’s climbed to 6.2%. Windsor (11.1%), Oshawa (9%), and Toronto (8.9%) remained the hardest-hit cities. U.S. moves to reopen USMCA talks amid tariff tensions On related developments, the U.S. is preparing to launch talks on renegotiating its largest free trade pact , the U.S.-Mexico-Canada Agreement (USMCA). The Office of the U.S. Trade Representative is set to launch public consultations on revising the deal within the next month, a step required by Oct. 4 under the 2020 implementation law. According to people familiar with the matter, a request for input from companies and unions could come as early as this week. However, Trump’s team has previously signaled an imminent release before delaying it. The beginning of consultations will be the first official act in what is likely to be a month-long process to renegotiate a deal that Trump signed in 2020, which contains a mandatory six-year review. Following a petition for comments, the administration must hold at least one public hearing and brief Congress on the deal in January 2026, before holding the first official trilateral USMCA review meeting by July 1, 2026. The USMCA was promoted as a signature trade achievement of Trump’s first term, replacing the 1992 North American Free Trade Agreement, which he had criticized on the campaign trail for shifting U.S. factories and jobs to other countries, especially Mexico. Still, in his second term, Trump has undercut the USMCA by imposing — and later scaling back — steep tariffs on Canada and Mexico, claiming they were warranted due to drug trafficking through both countries. He initially levied a 25% tariff shortly after taking office, before exempting goods that met the pact’s rules. According to a January report, the tariffs were also intended to boost U.S. leverage in renegotiation and push talks forward more quickly. Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free .
