Canada’s labour market is stabilizing, RBC says

RBC Assistant Chief Economist Nathan Janzen said in an Oct. 10 report that Canada’s labour market “showed signs of stabilization” in September, with stronger full-time job gains offsetting earlier weakness, though underlying data still point to a softer economic backdrop.

Janzen said the 60,000 net job gain, led by a 106,000 increase in full-time positions and a 46,000 drop in part-time work, was a “welcome reprieve” after steep employment declines in July and August that contributed to the Bank of Canada’s September rate cut.

“Year-to-date, employment is up 98,000 and now led by a 105,000 rise in full-time jobs,” he said, noting that previous job growth had been concentrated in part-time roles.

The unemployment rate held at 7.1%, unchanged from August but up half a percentage point from a year ago. Janzen said that while labour markets remain weaker than they were in 2024, the latest report “suggests stabilization rather than further deterioration.”

Population growth slowed to 28,000 in September, down from monthly gains exceeding 100,000 last summer.

Still, Janzen cautioned that the underlying data were mixed.

“Actual hours worked declined 0.2% despite the surge in full-time employment,” he said, though on a quarterly annualized basis, hours worked rose 0.4% in the third quarter, in line with RBC’s forecast for 0.5% GDP growth in Q3. Permanent layoffs edged higher, but most of the year-over-year increase in unemployment still reflects longer job searches among new entrants to the labour force.

Sector trends remained uneven, he said. Manufacturing employment rose 28,000 in September but is still down 3,000 year over year, while transportation and warehousing shed another 7,000 jobs, bringing employment 2% below last year’s level. Services employment rose 18,000 month over month and 225,000 year over year, showing continued resilience in consumer-facing sectors.

Regional patterns were mixed as well: Ontario’s unemployment rate climbed back to 7.9%, Alberta’s fell to 7.8% from 8.4% in August, and Quebec recorded the lowest rate in the country at 5.7%, despite the province’s manufacturing sector being affected by U.S. tariffs.

Janzen said the Bank of Canada is unlikely to view one rate cut as sufficient to offset broader economic weakness.

“The labour force data today probably isn’t positive enough alone to derail another cut in October,” he said. “However, future cuts beyond October would be less likely if government deficit spending ramps up as expected to help address tariff-related economic weakness.”

Wage growth for permanent employees held steady at 3.6% year over year, suggesting inflationary pressures remain contained even as hiring conditions stability.