Economy flat for a second month as payrolls shrink

Canada’s economy stood still in August for a second straight month, and the number of people on payrolls fell, Statistics Canada said, a combination that shows up differently depending on which release a reader opens.

Real gross domestic product was essentially unchanged in August, the agency said Friday, with 9 of 20 industrial sectors expanding. Advance information points to a 0.1 per cent decline in September. Even so, the agency said the numbers suggest the economy grew 0.3 per cent in the third quarter. The official quarterly estimate is due Nov. 30.

The day before, in its payroll survey, the agency reported that employees on payrolls fell by 49,600, or 0.3 per cent, in August. Output was flat and payroll employment was down, so the two measures did not move together in the month.

Part of the explanation is the same in both releases: the 2026 Census. Statistics Canada said the federal public administration sector, excluding defence, fell 2.1 per cent in GDP terms as Census work wound down. In the payroll data, federal public administration lost 15,900 jobs, or 4.1 per cent, in August. By our calculation, payrolls outside public administration fell by about 27,300 in the month, a smaller drop than the headline.

The public sector as a whole, which the agency defines as educational services, health care and social assistance, and public administration, fell 0.2 per cent in GDP terms. It was the first decline in six months. Our earlier look at the public sector job losses shows how much the federal workforce has swung this year.

Outside government, the picture was mixed. Retail trade rose 1.2 per cent, rebounding from July. Manufacturing rose 0.3 per cent, its fifth increase in seven months, led by machinery manufacturing at 3.8 per cent. Rail transportation grew 3.6 per cent, the largest monthly gain since March 2025, driven by wheat movements after what the agency called a record wheat crop.

Other sectors pulled the other way. Wholesale trade fell 1.4 per cent, the largest detractor, and motor vehicle and parts wholesalers dropped 4.4 per cent. Motor vehicles and parts manufacturing contracted 5.8 per cent because of a prolonged summer shutdown at a major auto assembly plant. Mining, quarrying and oil and gas extraction was essentially unchanged, with oil and gas extraction down 1.2 per cent for a third straight month as some oil sands mining facilities underwent maintenance.

For workers, the question is whether flat output is starting to reach hiring. The payroll release offers some reassurance. Job vacancies were little changed at 507,200 in August, and there were 2.9 unemployed people for every vacancy, down from 3.3 a year earlier. Average weekly earnings were up 3.7 per cent from a year earlier. Those figures describe a labour market that is not deteriorating quickly, even as payrolls slip.

Regional differences matter too. Alberta’s ratio of jobless people to vacancies has dropped to 2.8 from 3.9, a sign that conditions are not the same across the country.

The September advance estimate is a caution. Statistics Canada said the 0.1 per cent decline was driven by manufacturing and mining, quarrying and oil and gas extraction, partly offset by utilities and wholesale trade. Advance estimates are preliminary and are revised when the official data arrive.

Two limits apply to any comparison of the two releases. GDP is measured by industry output, while payrolls count employees, so a flat economy and falling payrolls can coexist when hours, productivity or the mix of jobs shift. Both series are also revised, and the Census effect should fade as temporary work ends.

How we did this: we read Statistics Canada’s The Daily release on GDP by industry for August 2026 (Table 36-10-0434-01), released Oct. 30, 2026, and compared it with the agency’s Survey of Employment, Payrolls and Hours figures for August, including job vacancies and earnings, published Oct. 29. The calculation of payrolls outside public administration is ours, using the published monthly changes. We have not sent requests for comment to any department for this story.

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