Canada Housing Market

Ontario’s job market took a step backward in August, adding another layer of uncertainty for home buyers, mortgage holders and the province’s housing market.

Ontario lost approximately 18,000 jobs in August 2026, according to the latest Labour Force Survey from Statistics Canada.

Across the country, employment fell by 42,000 jobs, significantly weaker than economists had expected.

The new numbers come just days after the Bank of Canada warned that persistent inflation could potentially lead to higher interest rates, leaving the central bank with two very different economic signals to consider.

Ontario Lost 18,000 Jobs In August

Employment in Ontario fell by 18,000 jobs, or 0.2%, in August, bringing the province’s total employment to approximately 8.3 million.

Ontario’s unemployment rate edged up to 6.9%, from 6.8% in July.

However, the latest decline comes after several months of much stronger job growth.

Ontario added a net 119,000 jobs between March and July, and employment was still 116,000 higher than a year earlier in August.

The province’s unemployment rate was also 0.8 percentage points lower than it was in August 2025.

Canada Lost 42,000 Jobs

Nationally, the August employment report was considerably weaker than expected.

Canada lost approximately 41,700 jobs, which Statistics Canada rounded to 42,000, while economists surveyed by Reuters had expected the country to add roughly 15,000 jobs.

The unemployment rate remained unchanged at 6.4%.

Most of the losses were in full-time employment, which fell by approximately 35,900 positions.

Canada had previously added about 181,000 jobs between April and July, including a gain of 75,000 in July alone.

Wage Growth Is Also Slowing

Another important part of the August report was wages.

Average hourly wages were up 2.0% year over year in August, slowing from a 2.8% increase in July.

Reuters reported that wage growth among permanent employees also slowed to around 2%, its lowest rate in more than seven years outside of the pandemic period.

Slower wage growth can be important for the Bank of Canada because rapidly rising wages can contribute to inflationary pressure.

A cooling labour market and slower wage growth could therefore give policymakers another reason to be cautious about raising interest rates too quickly.

What Does This Mean For Bank Of Canada Interest Rates?

This is where things get interesting.

Just two days before the employment report was released, the Bank of Canada held its policy rate at 2.25% but warned that inflation risks had increased.

Inflation has recently been hovering around 3%, largely because of higher gasoline prices, while new U.S. tariffs and Canadian counter-tariffs could also put upward pressure on prices.

Governor Tiff Macklem made it clear that the Bank is prepared to adjust interest rates if necessary to keep inflation under control.

But the August jobs report points in the opposite direction.

A weaker labour market can slow consumer spending and economic growth, which would normally reduce the need for higher interest rates.

Following the jobs report, Canada’s five-year government bond yield moved lower as markets digested the weaker-than-expected employment numbers.

The five-year bond yield is particularly important for the housing market because it can influence the pricing of five-year fixed mortgage rates.

Ontario’s Housing Market Is Getting Mixed Signals

For Ontario home buyers, these latest numbers create a complicated picture.

On one hand, weaker employment could reduce demand for housing.

Job security is a major factor in whether buyers feel comfortable taking on a mortgage, and a softer labour market can cause some households to delay purchasing a home.

On the other hand, weaker economic data could make the Bank of Canada more cautious about future interest rate increases.

If bond yields were to continue declining, it could eventually provide some relief for fixed mortgage rates.

But one month of weaker employment data is unlikely to determine the direction of mortgage rates on its own.

Inflation Is Still The Big Question

The biggest issue for the Bank of Canada remains inflation.

The Bank said CPI inflation has recently been around 3%, although inflation excluding gasoline was 2.2% in July and its measures of core inflation remained close to the 2% target.

That means policymakers are currently trying to balance two risks.

Raise interest rates too aggressively and the Bank could put additional pressure on an already uncertain economy and labour market.

Keep rates too low while inflation continues climbing and price pressures could become more difficult to control.

What Happens Next?

The Bank of Canada’s next interest rate announcement is scheduled for October 28, 2026.

Between now and then, policymakers will receive more information on inflation, employment and economic growth.

For Ontario’s housing market, those numbers could be especially important.

Higher rates could put renewed pressure on affordability and buyer demand, while a weaker economy could make the Bank more hesitant to tighten monetary policy.

For now, August’s employment report adds one more reason why the path for Canadian interest rates, and Ontario’s housing market, remains far from certain.

References

Statistics Canada — Labour Force Survey, August 2026
Read the September 4 Labour Force Survey

Bank of Canada — September 2, 2026 Interest Rate Decision
Bank of Canada maintains policy rate at 2.25%

Bank of Canada — Tiff Macklem’s September 2 Opening Statement
Read the Bank of Canada opening statement

Reuters — Canada Loses 41,700 Jobs As Summer Hiring Fades
Read the Reuters report

Canadian Mortgage Trends — Five-Year Bond Yield Retreats After Canadian Jobs Miss
Read the mortgage market analysis