TD Sees Risk of Job Decline in Canada's September Labour Force Survey, Expects Unemployment Rate to Edge Higher

11:31 AM EDT, 10/09/2025 (MT Newswires) -- Based on Consensus, Friday's Canadian Labour Force Survey (LFS) for September is expected to show a modest headline job gain of 5,000, said TD.

The bank sees the potential for a downside surprise relative to this estimate (roughly -35,000), but TD also urges caution around reading too much into it.

The risk of an undershoot largely reflects distortions related to tighter immigration policies and Canada's slower population growth, wrote the bank in a note to clients.

Digging a little deeper, employment estimates are derived from a sample survey of households that, in turn, is scaled up based on population size. If the estimate of the working age population shrinks, then measured employment will drop, unless offset by a rise in the employment-to-population ratio.

There is a good reason to expect an ongoing slowdown in adult population gains in Friday's report that is likely to dominate any change in the employment ratio, stated the bank. The LFS adult population estimates have been slow to capture the weakness recorded in the official quarterly demographic statistics so far this year.

Over time, these trends tend to converge, but in the near term, large gaps can open, especially during periods of rapid population shift, it pointed out. Some narrowing in the gap has been registered over the past few months, but further catch-up looks likely in September.

For example, in Q2 2025, the official Census population gain weakened to +614,000 (year-on-year), while the LFS clocked in +849,600. In Q3, the official Census population gain registered +389,000, while TD expects the LFS to clock in at roughly +640,000.

For this reason, it becomes important to focus on the unemployment rate (UR) as a better gauge of job market health, according to the bank. The UR has been grinding higher from 6.6% at the start of the year to 7.1% as of August. The bank expects a slight increase in the UR in the September report, to 7.2%.

This would be consistent with a further gradual cooling in job market conditions, but certainly paints a less downbeat picture than the employment figure.

Unlike the bond market, the Bank of Canada is unlikely to react to a significant drop in jobs if caused by swings in population estimates. Instead, the central bank will put more weight on other, more stable job market indicators such as the unemployment rate, vacancy rate, and a number of other indicators it closely monitors in its labor market dashboard, said the bank.

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