By Promit Mukherjee
OTTAWA, Oct 9 (Reuters) - Canada's economy shed a net 68,300 jobs in September and the unemployment rate edged up, data showed on Friday, erasing all the employment gains recorded earlier this year.
The unexpected drop follows a decline of 41,700 jobs in August, Statistics Canada said. The unemployment level in September inched up to 6.5% from 6.4% in August.
September was the first full month after a new round of US tariffs took effect against Canada. However, the largest job losses
were in the public sector, particularly healthcare, social assistance and education, as the government cut international student permits.
Analysts polled by Reuters had forecast an increase of 9,200 jobs and an unemployment rate of 6.5%.
With September's decline, Canada has lost a net 41,200 jobs so far this year, compared with a gain of 211,300 in the same period of 2025.
Job losses were split almost evenly between full-time and part-time positions.
Manufacturing, a sector partly exposed to US tariffs, lost a net 12,700 jobs.
Economists have said the latest US tariffs are unlikely to have a major impact on employment data in the coming months.
Money markets are no longer pricing in a rate increase from the Bank of Canada this month, although expectations of a 25 basis point hike had edged higher. Markets expect a 25-basis-point increase in December.
"Given the recent deterioration in the labor market, Canadian central bankers will likely need to keep rates unchanged later this month," Royce Mendes, head of macro strategy at Desjardins, said in a note.
"That said, we expect that higher energy prices will begin feeding other categories of inflation this fall, and could force officials to tighten policy soon."
The labor force participation rate, which measures the share of the population either working or looking for work, fell 0.2 percentage points to 64.8% in September, its lowest level in 29 years excluding the pandemic period.
The decline was driven largely by an ageing population leaving the workforce and slower immigration reducing the number of replacements.
Employment among young people aged 15-24 fell by 48,000 in September after a smaller decline in August.
Growth in average hourly wages for permanent employees, a closely watched measure of inflation pressures, accelerated to 2.3% year on year in September from 2.0% in August, Statistics Canada said.
The Canadian dollar weakened after the report, falling 0.44% to C$1.4287 per US dollar, or 69.99 US cents. Yields on two-year Canadian government bonds were down 9.5 basis points at 2.410%.
(Reporting by Promit Mukherjee. Editing by Dale Smith and Mark Potter)
