A trade war with the U.S. was primarily to blame for the Canadian economy losing 41,000 jobs in July and a further 66,000 jobs in August. For September, analysts expected Canada to reverse course and add just 5,000 jobs.
How Many Jobs Did the Canadian Economy Add in September?
Instead, the Canadian economy posted a surprise 60,400 net job gains. While the big increase in job gains is an obvious positive, the economy is still susceptible to a U.S. trade war. Canada’s economy has averaged approximately 24,000 job gains per month in 2025, roughly 10,000 less than in 2024 and 2023. This suggests that U.S. tariffs have resulted in Canadian companies either cutting jobs or simply not hiring more.
Despite the solid jobs gains, the unemployment rate stood at 7.1%. Outside of the pandemic, that’s the highest unemployment rate in nine years. Economists were forecasting the unemployment rate to edge up slightly to 7.2%.
One silver lining for Canada’s unemployment rate is that it has only increased by 0.1% over the last eight months, which is when fears about how a trade war with the U.S. would impact the Canadian economy first began.
Will the Bank of Canada Still Cut Interest Rates in October?
One important piece of economic data missing is a reading on inflation. The next inflation report comes out on October 21, and the Bank of Canada will announce its next move on interest rates on October 29. Barring unexpected inflation data, the strong September jobs data and steady unemployment rate could put a near-term interest-rate cut in jeopardy.
The federal budget is also expected to be tabled on November 4, and the Bank of Canada may want to see what’s in the budget before making any interest-rate decisions as well. Prime Minister Mark Carney expects to run a “substantial” deficit of as much as $90.0 billion, far greater than the $48.0-billion shortfall in 2024.
As a result, some analysts believe it would be wise for the Bank of Canada to hold off on any interest-rate cuts when it meets in late October.
Before the September jobs data came out on October 10, the odds of an interest-rate cut were about 70%. Following the September jobs data, the odds of an October reduction have fallen to 56%.
The odds of an interest rate cut in December are 65.5% while a reduction at the start of 2026 is fully expected.
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