After a Hot Summer, the Job Market Gives Back 42,000

August's Labour Force Survey ended a four-month hiring streak. The details matter more than the headline, including one line item that covers the staffing industry itself.

Canada's labour market stalled at the end of summer. Employment fell by 42,000 in August, a decline of 0.2 per cent, and the employment rate slipped 0.1 percentage points to 60.8 per cent, Statistics Canada reported on September 4. Economists had expected a gain of about 15,000. The unemployment rate held at 6.4 per cent only because the labour force shrank as well, with the participation rate easing to 65.0 per cent.

The setback follows a strong run. The economy added 181,000 jobs from April through July, including 75,000 in July alone. Year over year, employment is still up 217,000, or 1.0 per cent, and the jobless rate sits 0.7 percentage points below where it stood a year ago. TD Economics characterized August as a step backwards that was unsurprising after a string of hot reports, given how noisy the monthly data can be.

The line item that is us

The largest industry decline came in business, building and other support services, which lost 20,000 jobs, or 2.8 per cent. That LFS category includes employment services, the grouping that houses temporary help agencies, alongside security, janitorial and call centre work. A drop there can reflect fewer workers out on assignment.

One month in a volatile category is not a trend, and Statistics Canada noted that employment in the industry was little changed from a year earlier. But the timing deserves attention. The Canadian Staffing Index published by ACSESS, which tracks billed temporary and contract hours, rose to 92 in June from 88 in May, suggesting momentum in temp volumes heading into summer. The July and August index readings will show whether that momentum held or whether the LFS decline marks a turn.

Elsewhere, public administration shed 8,800 jobs, natural resources 7,700 and utilities 5,600. The number of public sector employees fell for a third straight month and is down 78,000 since May. Private sector employment was little changed in August but is up 156,000 over the year, while self-employment has grown by 80,000, or 3.0 per cent, over the same period.

Manufacturing was the lone bright spot, adding 22,000 jobs, about 14,000 of them in Ontario. Over the past 12 months, the biggest gains came in health care and social assistance (up 129,000), information, culture and recreation (up 49,000) and transportation and warehousing (up 47,000). Wholesale and retail trade recorded the steepest annual decline, down 55,000.

Wage growth hits an eight-year low

For staffing firms setting pay and bill rates, the most consequential number in the release may be the wage figure. Average hourly wages rose 2.0 per cent year over year to $37.02, down from 2.8 per cent in July and 3.3 per cent in June. Setting aside the distortions of 2021, that is the slowest pace since November 2017.

The slowdown is sharpest at the bottom of the pay scale. Wages for the lowest-paid quarter of employees rose just 1.1 per cent, to $18.66 an hour, and 1.3 per cent for the second quartile. The top two quartiles each grew 2.1 per cent.

That distribution matters because much of the temporary staffing market operates in hourly, lower-wage segments. Workers in those roles have lost bargaining power over the past year, and clients will notice. Economists caution that monthly LFS wage data can be volatile, so one reading should not be over-interpreted. But two consecutive months of deceleration point in a clear direction, and rate conversations for 2027 contracts will start from that baseline.

Slack beneath the surface

The labour market is not shedding workers broadly. The layoff rate was 0.8 per cent in August, below the 1.0 per cent recorded a year earlier and in line with pre-pandemic norms. The problem is that people who lose work are taking longer to find it. Of the roughly 1.5 million unemployed, 24.0 per cent had been searching for 27 weeks or more, well above the 2017 to 2019 average of 17.1 per cent.

That combination, few layoffs but slow rehiring, is the signature of a market where employers are cautious about adding headcount. TD Economics views the 6.4 per cent unemployment rate as a sign of excess supply and expects the Bank of Canada to stay on hold. Capital Economics economist Thomas Ryan argued the August report undercuts the idea that the economy has decisively turned a corner.

Young workers fared better this summer than last. The unemployment rate for returning students averaged 15.9 per cent from May to August, two percentage points lower than in 2025, although youth unemployment overall edged up to 12.9 per cent in August.