Economists concerned after labour market sheds jobs for third month in a row

Some economists are getting worried that a string of job losses in recent months is revealing cracks in the labour market.

Statistics Canada said Friday that the unemployment rate rose two tenths of a point to 6.7 per cent in October. The labour market shed 4,700 jobs last month, the agency said, and more people were also looking for work.

October’s modest decline followed a cumulative loss of 110,000 jobs across September and August. A Reuters poll of economists had expected the economy would bounce back with a gain of 13,600 jobs in October.

“For anyone hoping that October would bring a recovery in the Canadian job market after back-to-back negative surprises, today’s release is a disappointment,” said Sneha Puri, economist with jobs search site Indeed, in a media statement.

Private sector employment fell by 53,000 positions last month, marking the first decline in the segment since February. Employment in the public sector, meanwhile, was up 50,000 positions.

StatCan noted that, on a year-over-year basis, private sector jobs are still up while the public sector is down.

Employment in the wholesale and retail trade industry has trended down over the past year and the sector led losses in October, shedding 29,000 roles. Transportation and warehousing and food and accommodation also posted losses last month, offset by some gains in construction and education.

CIBC senior economist Andrew Grantham said in an interview that he had expected more of a lift in the October labour market from one-time factors like the Alberta referendum.

While he had been anticipating the jobless rate would tick up in the fourth quarter in the face of tariff-related headwinds, Friday’s employment figures suggest there’s more underlying softness in the jobs market.

“It does look as if we’re seeing some weakness in the labour market outside of those trade-sensitive areas. So that’s a concern for us right now,” Grantham said.

That could dampen expectations for a rebound in job growth in 2027, he added.

The unemployment rate for young workers aged 15 to 24 jumped to 13.7 per cent in October, up 0.7 percentage points from September, as employment edged down and more youth looked for work.

Young workers have faced a generally tough labour market in recent years but there had been little change in the jobless rate for the age group over the summer.

StatCan said the unemployment rate was higher for students compared with youth not attending school.

The agency said the layoff rate – the proportion of people employed in September who were laid off by October – was “virtually unchanged” compared with a year earlier at 0.7 per cent.

Average hourly wages rose 2.2 per cent annually in October, edging down from 2.3 per cent in September.

Puri said Indeed’s Canadian job postings ticked up at the end of last month, which could be an indication of future hiring.

If Canada can gain clarity on U.S. trade policy in the wake of the midterm elections this week, she said that could give employers the confidence to hire again.

“If this optimism isn’t then translated into a strong jobs report in the months ahead, the surprising weakness in headline employment will start to look less temporary and more like the beginning of a renewed cooling in the labour market,” Puri warned.

The October job figures come a little over a week after the Bank of Canada delivered its first interest rate hike in more than three years, raising its policy rate by a quarter point to 2.5 per cent.

Thomas Ryan, senior North America economist at Capital Economics, said in a note to clients that the uptick in the unemployment rate and muted wage growth should tell the Bank of Canada that there’s still slack in the job market right now.

The October jobs data should therefore push back on calls for much more tightening of monetary policy, he argued.

“Ultimately, this adds to our conviction that the bank will hike rates no more than twice more as a precaution against upside inflation risks, before calling it a day,” Ryan said.

Financial market odds of another quarter-point hike at the Bank of Canada’s final rate decision of the year on Dec. 9 stood at 35 per cent as of Friday afternoon, according to LSEG Data & Analytics.

Bank of Canada officials made clear after the October rate hike that their focus is on getting ahead of inflationary pressures spreading from the global energy shock, Grantham noted.

Soft labour market data and recent declines in the benchmark price of oil take pressure of the central bank to deliver another rate hike next month, he said.

“We have a lot of days for oil prices to do something volatile between now and December. But if those two forces stay in effect, we do forecast that they will hold interest rates at the December meeting,” Grantham said.