Canada’s economy just keeps taking hits—the latest is this morning’s job report. The unemployment rate climbed sharply in August, according to Statistics Canada’s Labour Force Survey. What was once a demographic issue is now a demand problem. Real job losses are materializing, and they’re not limited to trade-exposed sectors. The data points to a deeper shift: the economy isn’t just slowing—it’s contracting under falling demand and eroding confidence.
Canada Lost 66k Jobs, Unemployment Hits Highest Rate Since 2016
Canadian employment fell by 66k jobs (-0.3%) in August, after losing 41k jobs in July. The drop pushed the unemployment rate up 0.2 points to 7.1%—half of the 0.4-point increase over the past year. It’s now the highest since 2016, excluding the pandemic.
Canadian employment: Seasonally adjusted unemployment rate. In percentage points.
Source: Statistics Canada.
Unemployment is also proving to be unusually sticky. Just 15.2% of those unemployed in July found work in August, well below the pre-2020 average of 23.3%. This isn’t about a skills mismatch—jobs are disappearing fast.
Canadian Unemployment Surge No Longer Just A Population Story
Canada’s rising unemployment was once a demographic issue—population growth outpacing job creation. In August, the working-age population grew by 29.4k (+0.1%), slower than recent months but still strong by historical standards.
But the labour force shrank by 31.2k (-0.1%) while the number of unemployed rose by 34.4k (+2.2%). That means unemployment is no longer rising because of population growth—it’s rising due to actual job losses. The unemployment rate increase was muted only because roughly half of those who lost jobs exited the labour force. The bigger issue? A shrinking workforce means reduced output capacity for the economy.
Canadian Job Losses Are Broad, Undermine Soft Landing Narrative
Canadian employment: Employment change by industry in August 2025.
Source: Statistics Canada.
The employment weakness also extends far beyond the US trade conflict. Often seen as one of the most resilient sectors, professional, scientific & technical services lost a whopping 26k jobs (-1.3%) last month. Self-employment also contracted by 43k jobs (-1.6%), the sharpest drop for an already weak but critical segment. These are employment segments that are supposed to be resilient and sticky in the face of a downturn, but they weren’t.
Canada’s latest job data shows this isn’t just a trade story. The losses are broad and cross-industry, pointing to collapsing demand—even as population growth remains strong. With investment fleeing and economic growth increasingly reliant on government spending, this isn’t a short-term dip. It’s a crisis of confidence.
Vote importing another 4 million people will really solve this sutuation
Interest rates a big part of this one. BOC way too slow in reducing rates from their outrageous climb. Small business loans and construction loans are priced to high to allow growth so that’s not happening. No work there. Really hard to understand why a bank has to make $350,000.00 on a 25 year $500,000.00 loan. People wonder why homes are so expensive… just getting their bank interest back… maybe this up and down rate BS needs federal regulation with caps. Just thinking.
Banks have kept interest rates artificially low for 20 years. That’s a big part of why Canada’s housing got so outrageously expensive. Artificially low interest rates fuel asset bubbles. There are many other factors that contributed to this problem, including an enormous real estate speculation.
Exactly. People without a basic understanding think low rates help. They don’t. They encourage spending which is part of the reason they will drop rates during times of uncertainty. To encourage spending to drive the economy. They left them too low too long though and made our epic bubble and now everyone is mad that the bubble has peaked and no one can afford to live.
Interest rates are not the cause of a lack of building. Materials and municipal fees have gone through the roof. When cheap money was on offer, people foolishly bought into that market regardless, but what would that look like now with an even larger population? The average cost of a home would be pushing $2 million.
We are at a stage where there isn’t just little interest in investment in this country, but investment is withdrawing. The economy is in shambles…and people voted for more of the same (sic)
The issue of rates is complicated by the sole mandate of the boc to manage inflation. Since cpi was rising fast, the boc had no choice but to increase rates to manage it.
The problem in Canada, vs say the usa, is twofold. First is the massive flight of capital out of the country. Since the liberals effectively destroyed investment inenergy, resources, and ancillary industries, capital seeking roi left. On top of that, the poor choice to continue to allow double digit returns in housing meant that what ever capital was left migrated from productive investment to housing. This, as you note, left business without capital. Without capital, business cannot expand, and the economy and exports stalled.
This is the second big problem, in usd, Canada’s economy hasn’t kept up with inflation. In 2014, we had gdp per capita of 54kusd. Today we have the same gdp per capita in usd. Now the usd has risen from par in 2014 to 1.35 today. Add to that the usd has depreciated by 35% since 2014 and we have a net loss of real gdp per capita of 40+%. In pers03ctive, the great depression was only 35%.
Now in the usa, where most of the capital has gone, that gdp per capita is now 90k usd. So, while ours has collapsed, US standard of living has almost doubled nominally. Themain source of that rise has been manufacturing (defense/it), energy, and services. All of these require capital to grow.
Now, instead of getting rid of the authors of this mess, canada chose to be jealous of the usa and keep the authors of this misfortune. Carney was the principle economic advisor for this government since 2020. It was his policies that brought us here. If we look to the dismal mess in the uk, or the eu generally, we can see that with the exception of the 2009 of, carney has a track record of less than zero. In fact, it was his misuse of qualitative easing that sunk the uk, and canada into what is soon to be sovereign debt crises in both countries.
So, now carney is rushing to ‘fix’ the bad policies he advocated for, hoping somehow that will reverse this mess. However, given the massive credit risk faced by the check, bdc, etc, cdic he has chosen to continue with the false narrative of a supply problem in housing. This ma6 buy himanother 6-12 mos but sooner or later the massive unfu ded liabilities of this will co out, and canada will be the new Greece. What he needs to do now is massive layoffs in the public sector, Ireland style tax reform to attract investment, cancelation of every bit of green policy, and allowing the price of housing to adjust down. It will be a bad recession, but with an outcome that may be positive. If he doesn’t, canada will end up facing g the if and disaster.
To your point, interest rates, bank profits are not in any way positive for canada today. Carney is now choosing ba k profits over the welfare of his citizens. The question is when the narratives end and we are in a bank crisis, what will he do. History tells us he will back the banks. He could use the chmc to offset negative equity, forcing g revaluation of mortgages to lower prices, but instead is using what was supposed to be a subsidy for first time homeboys into a subsidy for speculators. These are bad choices.
All this doomsday nonsense about capital flight, Carney, and blaming liberals completely ignores the real reason housing is expensive in Canada. It comes down to basic supply and demand, combined with years of unchecked real estate speculation. We have had massive population growth, restrictive zoning that limits how much can be built, and government policies that fueled demand through cheap credit, subsidies, and tax advantages. On top of that, the Bank of Canada kept interest rates super low for far too long, which directly encouraged speculation and investors piling into housing. Rates should have been raised years ago to cool things down, but they never were, and that allowed the bubble to inflate further. Investors and speculators treated housing like a casino, and governments at every level looked the other way because rising home values made homeowners feel richer and kept voters happy. Politicians benefitted from the inflated market and had no incentive to actually fix it. That is why housing is unaffordable, not some fantasy about debt crises or capital leaving the country.
You have it backwards. It’s the extremely low rates of the last 25 years that caused this mess.
In Canada we have shorter term loans. The Amortization periods are 20 to 30 years typically but the terms are generally 3 to 5 years. Shorter terms benefits the bank, you are constantly shopping for better rates and renewing (renegotiating) your mortgage. If the Canadian federal government simply allowed 20 to 30 year terms to match the Amortization, homeowners would be saving more and banks would make less, just like in the USA. So why aren’t Canadians pushing for this to happen? Greedy banks are the tail wagging the Canadian federal dog.
Absolutely correct, BOC is crushing everybody while “fighting” inflation
Interest rates are still below the mean and it was only ‘outrageous’ because of the terror of small numbers and the ridiculous price of homes.
By historic standards, interest rates are normalized finally after 20 years of super low rates, supercharging house prices at the expense of everything else creating the poor economy we have now. Guys like Randy will never understand this ever.
There are no jobs. Homemoaners are underwater on their mortgages with no job or business income in sight.
Canada’s real estate ponzi died 10 years ago.
The punch drunk and giddy missed the memo.
They also continue to chose the worst option for regulation. Anyone 2ith minimal understanding of banking and monetary policy should understand that housing price is dictated almost entirely by bank regulations and monetary policy not by supply and demand.
Therefore, for an econom ist to claim that supply will drop prices is either a moron or a liar. Banks have literally no risk with adding unfunded laibilties to the chmc, cdic. They have virtually unlimited ability to create net new money to fund these loans, and therefore can contine to I crease housing prices exponentially forever. The role of the feds is to manage this, because 300 y of banking has shown greed is the main driver of bank decision-making, not risk management.
If supply and demand don’t matter in housing, then I guess 2008 in the U.S. was just a fairy tale and not the exact same cheap credit and speculation mess Canada copied.
Unemployment is a lagging indicator, as are foreclosures, real estate generally, meaning that things are already worse than we think. Particularly jarring is the complete lack of reaction by our ‘leaders’ and ‘journalists’.
Whether blaming trump, or spending hundreds of billions trying to slow the recession they caused.
It is scary that our current federal govt is finally reversing 10 y of bad policy, yet not accepting any responsibility for what was their bad choices. Even worse, it will take a decade or more for any of that to help us recover.
The real question is does when carney has to choose between banks and millions of people? I’m betting that’s why he got elected …..
Great report from Daniel. However, he had nothing to say about the unemployment rate of students who attended school full time in March and who intend to return to school full time in the fall. These data are collected from March to August and for obvious reasons are not seasonally adjusted. StatCan reported: “The unemployment rate for returning students stood at 16.9% in August, similar to the rate observed 12 months earlier (16.3%).” This is a rather odd statement as this is a 0.4 percentage point increase. What kind of jump in the unemployment rate would have qualified as notable?
Also: “For the summer of 2025 overall (the average from May to August), the unemployment rate for returning students aged 15 to 24 was 17.9%. This was the highest since the summer of 2009 (18.0%), excluding the pandemic year of 2020. The unemployment rate for returning students has increased each summer since 2022 (when it was 10.4%).” So this is a staggering increase in just three years in the unemployment rate for the cohort from which Canada would expect to draw a lot of its future leaders.
Rather than to the Orange Man, most of the blame can be assigned to the federal government’s dysfunctional immigration policies, notably the dramatic increase in the intake of students from abroad. The government is now supposed to be cutting back on the number of foreign students, but for the first four months of 2025 there were 194,000 people entering the country in the student category, i.e. almost 600 thousand on an annualized basis. And although for a number of years the government claims it has been tracking people exiting the country, the government is unwilling or unable to provide data on foreign students who have left the country.
The LFS treatment of foreign students is bizarre. An individual is treated as employed and part of the labour force if they have a job, but as withdrawing from the labour force while remaining in the working age population if they lose it. This means such a job loss will impact the participation rate but not the unemployment rate. Incidentally there was a 0.1 percentage-point decrease in the participation rate to 65.1% in August.
You’re both right – low rates encourage speculative demand, and supply increases can never keep up with this unlimited demand. Something like 10% of Canada’s housing stock is kept empty – that’s enough for everyone if it was made available. But low rates made it cheap to hold empty properties and the huge capital gains due to leverage (and tax fraud – of course its my primary residence!) made speculation a feeding frenzy – FOMO!
Low rates fueled insane price increases, circularly encouraging even more speculation. That’s why everyone wants to buy that second or third home!
The only way forward from here is a big reality check – home prices really CAN fall, and speculators really can get burned.
But our corrupt politicians from every party, who are practically all owners of multiple properties, will do everything they can to stop the collapse of house prices back to where they make sense, so this will be a long drawn out downturn in Canada, or a depression.