Canada’s labor market posted a surprise expansion in October, reversing prior declines, as employment rose 66,600 jobs and the unemployment rate fell to 6.9%, Statistics Canada reported on Friday. The data offers a rare bright spot for an economy that has faced headwinds from U.S. tariffs affecting key sectors such as steel and automotive.

October Job Gains Driven by Part-Time Employment

The employment surge in October was concentrated in part-time jobs, which increased by 85,000 positions, primarily in the private sector. Meanwhile, full-time employment declined by 18,500, reflecting the ongoing structural shifts in the labor market.

The results exceeded analyst expectations, who had forecast a jobless rate of 7.1% and a net loss of 2,500 jobs. Analysts and economists now view these figures as a potential early sign of recovery in Canada’s economy.

Royce Mendes, Managing Director and Head of Macro Strategy at Desjardins Capital Markets, commented:

“Finally, some good news on the Canadian economy. This could be the first sign of recovery for an economy that’s been reeling.”

Unemployment Rate and Youth Employment Improvements

The unemployment rate fell from 7.1% in September to 6.9%, marking the first significant drop in months. Youth employment also showed a notable improvement:

• Youth unemployment (ages 15–24) decreased to 14.1%, down from a 15-year high of 14.7% in September.
• Employment for the core-aged group (25–54) rose by 38,800 jobs, all in part-time positions, with unemployment falling 0.2 percentage points to 5.8%.

These gains reflect an easing of labor market pressures that had disproportionately affected younger workers.

Ontario Leads in Job Growth

Ontario, the province hardest hit by U.S. tariffs, accounted for the largest share of October job gains, with 55,000 new positions. Employment growth was particularly strong in wholesale and retail, transportation, and warehousing sectors.

Doug Porter, Chief Economist at BMO Capital Markets, noted that Ontario’s gains were partially supported by seasonal economic activity, including the Toronto Blue Jays playoff run, which boosted temporary employment in retail and services.

Wage Growth and Inflation Implications

The average hourly wage of permanent employees rose 4% in October, up from 3.6% in September, a key indicator closely monitored by the Bank of Canada for inflation trends. Wage growth in conjunction with job gains suggests a strengthening labor market, which could influence future monetary policy decisions.

Market Impact

The positive employment data strengthened the Canadian dollar, which rose 0.36% to 1.4065 against the U.S. dollar (71.10 U.S. cents). Two-year government bond yields increased 4.6 basis points to 2.405%, reflecting growing investor confidence in Canada’s labor market resilience.

Sector Highlights

• Services sector: Largest contributor to employment, with nearly four out of five Canadians working in services.
• Retail and wholesale: Added 40,700 jobs, continuing to be the biggest employer in Canada.
• Transportation and warehousing: Contributed significantly to the employment rebound.

Key Takeaways for Investors and Policymakers

1. Canada’s labor market shows unexpected resilience, led by part-time employment growth.
2. Unemployment declines, especially among youth, signal improving labor market conditions.
3. Wage growth may influence Bank of Canada policy, especially in monitoring inflation.
4. Ontario leads employment gains, highlighting regional economic strength amid tariff pressures.
5. Markets respond positively, with the loonie strengthening and bond yields rising.

The October jobs report offers optimism for Canada’s economic recovery, providing support for both consumer confidence and financial market stability.