08:51 AM EDT, 09/05/2025 (MT Newswires) -- A further slump in employment, resulting in a larger-than-expected increase in the unemployment rate, adds to evidence that the Bank of Canada needs to restart interest rate cuts later this month, said CIBC.

The 66,000 decline in jobs was even worse than the 41,000 reduction seen in the prior month and contrasted with consensus expectations for a slight increase, noted the bank following Friday's Labour Force Survey (LFS).

While the majority of the reduction came in part-time work (-60,000) there was also a modest decline in full-time positions, pointed out CIBC.

By sector, trade-exposed areas such as transportation & warehousing and manufacturing saw big drops, but they weren't solely responsible for the overall reduction with business & technical services also seeing a marked reduction in positions, stated the bank. Unlike prior months, youth employment/unemployment was fairly stable in August, with the overall weakness driven by prime aged (25-54) workers.

The slump in employment saw the unemployment rate increase to 7.1%, from 6.9%, despite a further slight downtick in participation. Hourly wage growth for permanent employees surprisingly accelerated to 3.6% from 3.5%, but that could be due to compositional factors, as clearly there is slack building up in the labor market.

Overall, Friday's data demonstrates the need for further interest rate cuts, and the bank continues to forecast a 25bps move at the Sept. 17 policy meeting with another to follow in Q4.