Canadian Payroll Employment Falls in August as Bank of Canada Raises Rate to 2.5%
Key Facts
The number of employees on Canadian payrolls fell in August, according to data published by Statistics Canada on October 29, while remaining above its level a year earlier. Weekly wages rose during the month and year over year, while vacancies were little changed. The agency said much of the decline in public administration was linked to the end of temporary hiring activities for the 2026 census. These factors limit the extent to which the payroll decline can be read in isolation as evidence of a collapse in private-sector labor demand. This series differs from the official unemployment measure, so payroll movements alone do not mean the unemployment rate moved in the same direction.
The decline extended to public administration, but the end of temporary census-related jobs explains much of it, according to Statistics Canada. This reading alone did not provide evidence of a comparable decline in private-sector hiring. Meanwhile, vacancies were little changed, weakening the conclusion that the monthly decline reflects a broad contraction in employers' demand. The Bank of Canada said in its Summary of Current Conditions that layoffs remain low. But it noted that higher long-term unemployment and weak vacancies are making it harder than usual for unemployed people to find work. These indicators depict a labor market in which job searches are difficult even as vacancies decline only modestly, with payroll figures alone not providing a complete measure of unemployment.
On wages, Statistics Canada reported that average weekly wages rose in August, both month over month and year over year. This measure differs from hourly wages, and its movement may reflect changes in pay, the composition of employment, hours worked and base-year effects. The Bank of Canada said wage growth is running at around 3% across multiple measures, and businesses' expectations for wage growth remained close to 3%. The combination of higher weekly wages and weak vacancies indicates that wages and employment do not necessarily move in the same direction. Wage trends therefore remained part of the broader picture the bank monitors in assessing economic activity and price pressures.
The Bank of Canada raised its overnight rate target by 25 basis points to 2.5% on October 28. The bank said inflation linked to higher energy prices and indicators of economic activity were among the factors it addressed in its announcement. It estimated GDP growth at 3.3% in the second quarter, while recent indicators pointed to growth of about 2% in the third quarter. It also forecast growth to slow in the fourth quarter of 2026 because of new U.S. tariffs before recovering in 2027. The bank projected the Canadian economy would grow 1% in 2026 and 2% in each of 2027 and 2028, with uncertainty over trade relations between Canada and the United States continuing.
GDP by industry for August is scheduled for release on October 30, along with an advance estimate for September, according to Statistics Canada's calendar. The release follows the payroll data and may add a reading on economic activity over the same period. The Bank of Canada's next interest rate announcement is scheduled for December 9, 2026, with its next Monetary Policy Report due on January 27, 2027. The schedule means GDP data will precede the next two monetary policy dates. Developments in trade with the United States will remain among the sources of uncertainty cited by the bank in its forecasts.