Canada’s job market stagnated in August, shedding 42,000 positions, according to data released by Statistics Canada on Friday. This decline caught some analysts off guard as they had anticipated a fourth consecutive month of job gains since May. The unemployment rate remained unchanged at 6.4 percent for the month.

The latest Labour Force Survey revealed a decrease of 20,000 public sector jobs for the third straight month, while there was little change in the private sector employment numbers. Notably, the manufacturing industry showed resilience by adding 22,000 jobs in August, while sectors such as public administration, natural resources, and utilities experienced declines.

CIBC’s chief economist, Andrew Grantham, noted that manufacturing was the sole sector with a significant employment increase in August. He highlighted that recent economic indicators, including exports and monthly GDP figures, suggest a slowdown in the economy in Q3 after a robust second quarter, amidst heightened uncertainty surrounding U.S. trade relations.

Regionally, Quebec faced the most significant job losses, shedding 19,000 positions, followed by Ontario with an 18,000 job decline. Despite the soft job report, Bank of Montreal’s chief economist, Douglas Porter, stated that the results were not entirely unexpected given Canada’s recent strong job performance.

Statistics Canada reported that average hourly wage growth in August was the slowest in nearly nine years, with a decrease to two percent on an annualized basis from 2.8 percent in July and 3.3 percent in June. Economists in a Reuters poll had predicted an addition of 15,000 jobs in August, with the unemployment rate remaining at 6.4 percent.

The recent job data marks a departure from the previous months of gains, with the Canadian economy adding 75,000 jobs in July. From April to July, a total of 181,000 jobs were created during that period.

The latest job report comes amidst ongoing trade tensions between Canada and the U.S., with recent tariff impositions on both sides affecting various industries. To alleviate the impact on workers and businesses, the federal government introduced a $7.5 billion economic relief program in addition to the existing $25 billion in tariff support over the past 18 months.

Industries reliant on U.S. export demand continue to face economic uncertainty, with layoffs in these sectors outpacing others over the past year leading up to August. Scotiabank economist Mitch Villeneuve highlighted a gradual decrease in the share of Canadian exports bound for the U.S., with a shift towards faster export growth in non-U.S. markets, particularly Europe.

While Canada experienced a cooling labor market in August, the U.S. reported job gains, with American employers adding 162,000 jobs last month. The U.S. unemployment rate held steady at 4.1 percent. President Trump praised the strong U.S. job numbers and called for a Federal Reserve interest rate cut, threatening consequences if his demands were not met.

In contrast, many economists expect the Bank of Canada to maintain its policy rate at 2.25 percent for the remainder of the year.