Canada’s unemployment rate jumps to 6.7% as economy loses 4,700 jobs

Canada’s unemployment rate jumped from 6.5 per cent to 6.7 per cent in October as the economy lost 4,700 jobs and more people searched for work.

Approximately 18,100 full-time positions were shed in October — a 0.1 per cent decline month over month — while part-time employment grew by 13,400 positions — a 0.4 per cent increase.

The latest Labour Force Survey data also showed 33,000 more people were looking for work, an increase of around 2.2 per cent month over month.

Most of the job losses were recorded in the services sector, which shed 25,300 jobs, a 0.1 per cent month-over-month decline. Wholesale and retail trade took the biggest hit, losing 29,000 jobs.

Meanwhile, 20,600 jobs were added to the goods-producing sector. Construction was up by 16,000 jobs and educational services added 15,000 jobs.

Overall, 52,500 private sector and 1,800 self-employed positions were lost in October, while the public sector gained 49,600 jobs.

October marked the second consecutive monthly increase in the unemployment rate, though it remains below the recent peak of 6.9 per cent in April 2026.

The employment decline was surprising for some economists, who expected the economy to add around 15,000 jobs in October.

Nathan Janzen, assistant chief economist for RBC Economics, said the monthly employment numbers were “extremely volatile” and the broader trends indicated that the labour market was slowly improving.

On a year-over-year basis, the unemployment rate was down by 0.2 percentage points in October.

“It was a little bit of a downside surprise, but if you look at the details, the employment declines were not broad-based,” he said in an interview.

“This is against a pretty challenging economic backdrop for Canada with the U.S. tariffs in place. They’re still significantly impacting a subset of the Canadian economy. You’re still seeing gradual improvement relative to that backdrop.”

David Rosenberg, president of Rosenberg Research and Associates, raised concerns about the slowing wage growth.

Average hourly wages grew by 2.2 per cent year over year in October, following a 2.3 per cent increase in September and two per cent increase in August. This is a slowing down from the 2.8 per cent year-over-year growth from July.

“When you’re getting a slowing in the wage trend of this magnitude, it’s telling you that the disinflationary output gap is widening,” he said in an interview.

“The imported energy-induced inflation shock is creating the conditions for negative growth in real work-based incomes, which will then translate into negative trends on real consumer spending. That is going to force the other components of the Consumer Price Index to deflate.”

Both Janzen and Rosenberg said they’re not concerned that Friday’s report is indicative of the start of a trend because the month-to-month data is still too volatile.

However, the second consecutive rise in the unemployment rate is a signal that the Canadian economy is still fragile, despite showing signs of resilience throughout the year.

Rosenberg said there is a good chance that Canadian consumers will start to reduce their spending if the labour market continues to remain soft in the months to come.

“There’s not a snowball’s chance in hell that you’re going to be getting a vibrant economy if the labour market isn’t playing ball. The reality is that the consumer is still the biggest component of the Canadian economy,” he noted.

“This energy price shock hits the wall in the labour market, which means that it is a real income squeeze in the household sector, and a margin crimp in the corporate sector outside the resource patch.”

RBC Economics’ forecasts, however, projects that the unemployment rate will keep edging lower in Canada to below the six per cent mark in the second half of 2027.

Economic growth is also expected to slow from 3.3 per cent in the second quarter of 2026 to 1.8 per cent in the third quarter and 1.5 per cent in the fourth quarter.

“You’re in that world where the economic backdrop is still fragile, and it’s not a convincingly improving trend. It’s very gradual. You will see some bouncing around along a very modestly positive trend line,” Janzen said.

“It’s more likely that as the economy continues to gradually improve, you would expect to see the unemployment rate edging lower rather than higher going forward.”

Overall, Rosenberg and RBC Economics both expect the Bank of Canada to hold interest rates at 2.5 per cent in December.

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RBC Economics expects the central bank to hike rates to 3.25 per cent by the end of 2027 in its most recent monthly forecast, while Rosenberg urged more caution from central bank governor Tiff Macklem.

Macklem previously told reporters that the Bank of Canada’s governing council is going to consider the possibility of another rate hike one meeting at a time.

“It’s going to take more than the shock that we’ve seen on the energy price front to generate a spillover into broad inflation with nominal wages slowing down as much as they are. Tiff Macklem should realize that the odds of any energy spillover are minimal at best, judging from what’s happening in the labour market and the visible slowing pattern in nominal wages,” Rosenberg said.