Next Friday’s release of Canada’s Labour Force Survey (LFS) will arrive against a backdrop of mounting economic uncertainty. Market watchers will be scrutinizing not only the headline employment and unemployment figures, but also age-cohort splits and sectoral trends. The stakes are especially high for youth employment, which has shown pronounced volatility and could deviate from typical seasonal patterns this time around.
What we’ve seen so far
Over the summer months, Canada’s labour market has shown signs of softening. In July, the economy shed some 41,000 jobs, led by declines among youth (15–24) and in sectors such as information, culture and recreation, and construction. In August, employment declined again, this time by 66,000, and part-time work bore the brunt of the losses, while full-time positions held more steady. The unemployment rate rose to 7.1 percent.
Some sectors are faring better than others. Construction, accommodation and food services, and utilities posted modest gains in August, helping to offset broader softness. On the flip side, professional, scientific and technical services, transportation and warehousing, and manufacturing have borne heavier losses. Meanwhile, slower population growth (linked to changes in immigration flows) has dampened the pool of new jobseekers, which may temper the upward pressure on the unemployment rate.
Analysts expect that in the coming report we may see further weakness in total employment figures, with a potential uptick in the unemployment rate. Some forecasts suggest that Canada’s labour market softness has not yet fully run its course.
What to look for next week
1. Youth employment and seasonal adjustment quirks
Youth employment is always volatile, owing to school schedules, summer hiring, and transitions in and out of education. However, this year may not follow past seasonal patterns. If firms pull back further, seasonal adjustment could exaggerate declines or mask a sharper drop in youth jobs. A steeper-than-expected fall in youth employment would send a strong signal that demand is weakening, especially in lower-wage, entry-level roles.
2. The breakdown by full-time versus part-time
August’s losses were concentrated in part-time work, leaving full-time employment relatively unscathed. If that pattern continues, the labour force report may show continued erosion of casual, flexible jobs rather than core full-time roles. A broad-based decline extending into full-time work would mark a deeper shift.
3. Sectoral divergences
Expect further contraction in trade-exposed sectors and those sensitive to external demand, such as manufacturing. RBC has flagged that manufacturing, already under pressure, is likely to continue lagging. But sectors like health, utilities, and parts of construction or public services may offer some cushion. Any outperformance in these sectors could point to where Canada’s “resilient cores” lie.
4. Participation and labour force growth
A flat or declining labour force could mute the rise in unemployment. If discouraged workers leave the labour force, the unemployment rate may understate underlying slack. Given the slower population growth, labour force gains are likely to remain subdued.
What it could mean going forward
If next week’s numbers confirm further slippage, policymakers and market actors will read them as reinforcing the view that Canada is entering a more entrenched phase of labour market cooling. The Bank of Canada, having already cut rates in September, may interpret weak job data as validation for keeping monetary policy accommodative. (Of course, inflation will remain the ultimate arbiter of the Bank’s path.)
For youth, a sustained deterioration in employment prospects could have lasting scarring effects: delays in starting careers, erosion of skills, and lower lifetime earnings. The divergence across sectors may deepen structural shifts in which industries matter most in Canada’s economic future.
In terms of hiring sentiment, private sector hiring indices and vacancy data will gain more weight if the LFS softens. Past episodes (both in Canada and globally) suggest that as headline labour figures weaken, firms pull back on posted vacancies, which feeds into a self-reinforcing cycle of slower hiring. The “job openings to unemployed” ratio, should it continue to narrow, would underscore just how competitive the market is becoming for jobseekers.