Macklem Flags ‘Soft’ Canada Labour Market Despite September Job Gains Amid Tariff Fears
In the shadow of escalating U.S. tariffs and trade jitters, Bank of Canada Governor Tiff Macklem delivered a sobering assessment this week: Canada’s labour market remains “soft” despite a surprising 60,400 job additions in September. The rebound offers fleeting relief, but underlying weakness signals tougher times ahead for workers and businesses alike.
Macklem’s remarks, delivered during media callbacks from Washington where he attended International Monetary Fund and World Bank meetings, underscore the fragility of recent employment data. The September surge partially offset over 100,000 positions lost in July and August, yet Macklem dismissed it as volatile and not indicative of broader strength. “What you see over a number of months is a labour market that has softened,” he told reporters, highlighting stagnant hiring outside tariff-hit sectors like steel, aluminum, autos, lumber, and transportation.
This comes as the Bank of Canada prepares for its next policy rate decision on October 29, following a 25-basis-point cut to 2.5% in September—the first trim since March. Traders, reacting to Macklem’s comments, boosted odds of another cut to two-thirds, up from about half beforehand. The central bank’s upcoming monetary policy report will include its first base economic projection since January, approached with “humility” amid heightened uncertainty.
The backdrop to this softness traces to the intensifying U.S.-Canada trade war under President Trump’s renewed tariff policies, which have hammered exports and business investment. Nearly 25% of Canada’s economy hinges on U.S. trade, and Macklem noted job losses concentrated in “heavily tariffed sectors.” Beyond those, “you’re not seeing a lot of layoffs, but you’re also not seeing a lot of hiring,” he said. Youth unemployment is climbing as new entrants struggle to land roles, while the overall rate held steady at a concerning 7.1% in September—up 0.5 percentage points from a year ago.
Economists echo Macklem’s caution. Avery Shenfeld, chief economist at CIBC, described the jobs data as a “head fake,” pointing to slowing job vacancies and wage pressures that align with a cooling market. “The rebound doesn’t erase the prior declines; it’s more like a pause in the softening trend,” Shenfeld said in a recent note. Similarly, RBC Economics flagged that while year-to-date employment is up 98,000 since December, led by full-time gains, details remain “softer than headlines suggest.” Hiring demand is waning, with job openings dropping and the unemployment trajectory likely upward in the near term.
Public sentiment mirrors the unease. On social media, Canadian workers vented frustration over stagnant opportunities, with one X user posting, “September jobs bump? Great, but my sector’s still ghosting resumes—thanks, tariffs.” Business groups, like the Canadian Chamber of Commerce, urged swift action, warning that prolonged uncertainty could tip small firms into layoffs. Advocacy for deeper rate cuts has grown, with some economists pushing for 50-basis-point moves to counter the underperforming economy.
For everyday Canadians, the implications cut deep across economic fronts. Households face squeezed budgets as soft growth—projected at around 1% for the second half of 2025 after a 1.6% Q2 contraction—curbs wage hikes and consumer spending. Lifestyle strains are evident in rising youth joblessness, delaying milestones like homeownership in an already unaffordable market. Politically, it amplifies calls for trade diversification and USMCA renegotiation protections ahead of next year’s review, where tariff-free access hangs in the balance. Technologically, sectors like manufacturing grapple with automation offsets to hiring freezes, while remote work trends offer slim buffers.
Inflation data adds another layer, with Statistics Canada set to release September figures on October 21. Headline rates hover near the 2% target, but core measures linger elevated; the bank favors its trim and median gauges showing 2.5% underlying pressures. Macklem emphasized upcoming business and consumer surveys will inform the outlook, stressing a risk-focused approach over rigid forecasts.
As tariffs broaden their global reach and domestic hiring stalls, Macklem’s view paints a picture of resilience tested by external shocks. The Bank of Canada’s October report could recalibrate expectations, but for now, the labour market’s softness tempers optimism from September’s gains. With policy tools in play, the path forward hinges on balancing inflation control against economic drag— a delicate dance as winter looms.
Looking ahead, if trade tensions ease or rate cuts materialize, a modest pickup in hiring could emerge by Q1 2026. Yet persistent uncertainty risks deeper slowdowns, potentially widening the output gap and pressuring the loonie. Canadians brace for a bumpy ride, hoping central bank humility translates to bold, timely support.
By Sam Michael
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