07:24 AM EDT, 08/11/2025 (MT Newswires) -- July Canadian labor market performance was weaker than anticipated on Friday, with the largest net job losses since January 2022, note ING.

Net employment decreased 40,800 versus a 10,000 gain consensus forecast and June's unexpectedly strong 83,100 rise, pointed out the bank. The July report demonstrates volatility in the Canadian economy in response to renewed trade tensions and tariff threats with the United States.

While the unemployment rate held steady at 6.9%, ING anticipates that the weakened performance will put pressure on the Bank of Canada to cut rates. The policy rate was held at 2.75% on July 30. However, Governor Tiff Macklem expressed concern for economic weakness throughout the second half of the year.

Given Friday's Labour Force Survey (LFS), ING anticipates the BoC will begin to cut interest rates again at its meeting on Sept. 17.

While the jobs report showed clear signs of weakness, Canadian workers have remained surprisingly positive about the jobs outlook, added the bank. In July, 54.9% of employees aged 25-64 reported being very confident in their employment prospects, with only 4.1% of employees reported not being confident.

Of those not confident, 27.5% reported industry layoffs and 12.3% reported tariff-related uncertainty. Nonetheless, the weakened LFS does reflect the BoC's expectations of a slowing economy through the year.

Following the policy rate decision, the BoC maintains three scenarios for tariffs: current, de-escalation, and escalation. Under the current tariff scenario, Canada's central bank anticipates a modest weakening of the economy in 2025, with rebounds over 2026 and 2027.

However, Governor Macklem has also emphasized that with a weakening economy and downward pressure on inflation, "there may be a need for a reduction in the policy interest rate."

The bank echoes this sentiment, anticipating that the BoC will begin to cut rates at its September meeting, with two cuts before the end of the year.