Canada’s Labour Market Stumbles: What Weak Jobs Mean for Commercial Real Estate Debt

Canada’s job market took a sharp turn in September, with Statistics Canada reporting a loss of 68,000 jobs and public sector employment down for the fourth straight month. The decline was led by educational services, and the unemployment rate climbed back to its level at the start of the year.

For commercial real estate investors and borrowers, the question is whether this labour market weakness will translate into lower interest rates and cheaper debt. But as central bank watchers and economists warn, the answer is far from straightforward. This article unpacks the latest jobs data, what it means for Bank of Canada policy, and why testing your refinance at today’s and higher rates is more important than ever.

Statistics Canada reported that "in September, employment declined by 68,000 ( -0.3%), split between full-time work ( -35,000; -0.2%) and part-time work ( -33,000; -0.9%). The employment decline in September follows a decrease in August ( -42,000; -0.2%)." The September setback was the deepest monthly loss of 2026 so far, and it blindsided many analysts. According to mpamag.com, "the unemployment rate climbed to 6.5% in September, back to where it stood at the start of the year. The country has now lost a net 41,200 positions in 2026, compared with net gains of 211,300 over the same stretch a year earlier."

The public sector was hit especially hard. Statistics Canada noted, "in September, the number of public sector employees declined by 70,000 ( -1.5%). This was the fourth consecutive monthly decline for the sector. On a year-over-year basis, the number of public sector employees was down by 119,000 ( -2.6%), with most of the decline attributable to employment in educational services." Educational services alone shed 35,000 jobs ( -2.2%) in September. Health care and social assistance lost 23,000 jobs ( -0.8%), and manufacturing was down by 13,000 ( -0.7%).

Regionally, Quebec led the losses with 49,000 jobs gone ( -1.1%), followed by British Columbia ( -20,000; -0.7%) and Manitoba ( -4,400; -0.6%). Alberta, Newfoundland and Labrador, and Prince Edward Island saw modest gains. The sectoral and regional breakdowns highlight that this is not a broad-based collapse, but a sharp correction in specific areas, especially the public sector and education.

With back-to-back months of job losses, many might expect the Bank of Canada to cut rates or at least signal cheaper debt ahead. But the reality is more nuanced. Douglas Porter, chief economist at Bank of Montreal, told The Globe and Mail, "A second consecutive month of sizable job losses washes away the surprising strength reported in Canada's job market through the early summer. On balance, we continue to believe that the appropriate stance by the Bank of Canada is watchful waiting, particularly so with employment suddenly clouding over."

TD Economics echoed this caution, writing, "That leaves the October 19th CPI report as the most important data point to guide the BoC's policy direction. A mild reading, particularly across core measures, would reinforce our view for the BoC to remain on hold. However, firmer core inflation and a broader pickup in price pressures would support the case for some policy tightening. For now, we think the Bank will remain content on taking a more data-dependent approach to their next policy move."

The federal budget projects that "higher oil prices are expected to push CPI inflation to 2.5 per cent in 2026 (up from 2.0 per cent in Budget 2025)." Wage growth remains moderate at 2.4%, according to mpamag.com, and economic growth is expected to slow further in Q4. Despite this, markets are still pricing in some risk of a rate hike before year-end. As mpamag.com notes, "Markets are currently pricing 27% odds of a hike in October, and 88% for December, the latter down from being fully priced yesterday."

In short, weak jobs data alone does not guarantee cheaper debt. The Bank of Canada is watching inflation and other data closely, and could hold or even tighten if price pressures persist.

For commercial real estate owners and investors, the message is clear: do not assume that weaker jobs data will automatically lead to lower borrowing costs. The central bank is in "watchful waiting" mode, and the next move will depend on inflation data as much as employment.

This means every refinance decision should be stress-tested at today’s rates and at a higher rate scenario. The risk is not just that rates stay elevated, but that they could rise if inflation surprises to the upside. As the market recalibrates, lenders may also tighten underwriting standards or offer less generous terms, especially for properties in sectors or regions facing more economic headwinds.

Tools like EVALUAITE’s commercial proforma DSCR calculator can help you run your own numbers, test your deal at multiple rate scenarios, and make more informed decisions before you commit to a cap rate or a refinance. In this environment, prudent risk management is more important than ever.

Key takeaways

• Canada lost 68,000 jobs in September, led by public sector and education.
• Unemployment rate climbed to 6.5%, erasing early-year gains.
• Bank of Canada is in 'watchful waiting' mode, not rushing to cut rates.
• October CPI report will be key for future rate decisions.
• Test refinance scenarios at both current and higher rates.