On the Radar: Canada lost jobs but oil topped $100. Which matters more for mortgage rates?
- Economic insights
- Sep 10, 2026
- First National Financial LP
Quick takes:
- Canada lost 42,000 jobs in August against expectations for a 15,000 gain, but unemployment held at 6.4% and manufacturing added 22,000 positions.
- Brent crude futures crossed US$100 per barrel midweek, while a new U.S. energy outlook pointed to supply constraints lasting into 2027.
- Current odds favour a hold at 2.25% in October, but assign a 39% chance to a quarter-point increase and show a 0% chance of a cut.
- Fixed mortgage pricing remained under pressure with the latest five-year Government of Canada yield reading at 3.44% midweek, while variable rates still depend on changes to prime.
Canada’s latest employment report gave borrowers a reason to hope for lower rates, but oil markets offered a warning this week. The August employment figures, released late last week, showed a loss of 42,000 jobs. Then midweek, Brent crude futures crossed US$100 per barrel as renewed attacks threatened Middle East energy supplies.
Those developments pull the rate outlook in different directions, because weaker hiring can reduce spending while expensive energy raises costs. For mortgage borrowers, the answer depends on which rate they mean. Domestic weakness strengthens the case for eventual variable rate relief, but fixed mortgage pricing can remain under pressure before the Bank of Canada makes another decision.
The jobs report was weak but not uniformly so
August’s result fell well short of the 15,000 gain economists had expected. However, it followed a cumulative increase of 181,000 jobs from April through July. One disappointing month partly reversed those gains rather than establishing a sustained decline in employment.
The details also resist a simple recession reading. Business, building and other support services lost 20,000 positions, while public administration, natural resources and utilities also declined. Manufacturing moved the other way, adding 22,000 jobs, which matters when concerns about trade dominate the economic discussion.
Average hourly wage growth also eased, slowing to 2.0 percent year over year from 2.8 percent in July. Meanwhile, unemployment remained at 6.4 percent, even as the share of the population with a job slipped. For the Bank, that combination deserves attention without proving that the recovery has ended.
Oil prices are testing the prospect of relief
Brent futures, the widely followed international oil benchmark, moved above US$100 midweek. Renewed attacks on shipping and energy facilities threatened supplies already constrained by the conflict. The mortgage question is how long those disruptions last, because a brief price spike and a prolonged shortage have different consequences.
The U.S. energy outlook released midweek pointed to a slower recovery in supply. It expected Middle East crude production to remain below pre-conflict averages until the second quarter of 2027. Under that forecast, Brent spot prices would average around US$90 during the second half of this year, so relief would be gradual.
That forecast needs a timing qualification, however. It was completed late last week, before the latest escalation, and explicitly excluded later market developments. Its projection therefore cannot be treated as a forecast incorporating the midweek attacks or as a ceiling on prices.
The pressure also extends beyond the cost of crude. Under the same outlook, U.S. diesel inventories were projected to remain below their five-year seasonal low through much of 2027. Since diesel moves goods as well as vehicles, sustained shortages can raise business costs even if the most visible oil benchmark retreats.
The bank must weigh both risks
Last week, the Bank of Canada held its overnight rate at 2.25 percent, before the August jobs report arrived. Higher energy costs increased inflation risks while new tariffs made growth less certain. That means the employment decline adds information to an already difficult balancing act, rather than answering the rate question by itself.
Underlying inflation gave the Bank room to be patient. Inflation excluding gasoline was 2.2 percent in July, while core measures remained near the 2 percent target. However, prolonged high oil prices and refinery margins increased the risk of costs spreading into other prices.
The distinction matters because an energy shock can hurt growth and raise inflation at the same time. Weaker employment may eventually reduce demand enough to ease broader price pressure, but that adjustment takes time. Until the balance becomes clearer, neither the jobs loss nor the oil price alone provides a compelling reason to expect an immediate policy reversal.
Current odds put the chance of an October hold at 61 percent, compared with 39 percent for a quarter-point increase to 2.50 percent. However, they show a zero percent probability of a cut, showing how far the outlook remained from immediate relief despite the jobs loss. Those figures are a changing estimate rather than a promise, and a displayed zero does not make a cut impossible.
What this means for Canadian mortgage rates
Variable rates respond through prime, which is influenced by the Bank’s overnight rate. A weaker labour market could help make the case for a future cut, but the employment report does not change prime. Borrowers therefore need an actual change in their lender’s reference rate before that economic weakness reduces their mortgage interest rate.
Fixed pricing has already faced pressure despite the employment decline. By midweek, the latest available five-year Government of Canada benchmark reading was 3.44 percent, up from 3.40 percent late last week. That reading preceded the midweek US$100 futures headline, so it cannot be attributed solely to that crossing.
Government bond yields help anchor lenders’ funding costs, but they do not determine mortgage offers on their own. Funding spreads, competition and borrower characteristics also matter. A higher benchmark can make new fixed offers more expensive without changing an existing borrower’s fixed contract.
The U.S. outlook adds another influence because Canadian funding markets are connected to global bond markets. Continued U.S. disinflation would support keeping rates steady, while renewed price pressure could strengthen the case for tightening. That uncertainty can affect Canadian fixed pricing even while domestic conditions argue for patience.
What could change the picture
A sustained recovery in energy supplies would improve the outlook, especially if gasoline and diesel costs eased together. However, a single day of cheaper crude would offer less reassurance than several weeks of improving availability. The useful test is whether lower costs begin reaching businesses and households, rather than whether oil briefly crosses a round number.
Further labour weakness alongside subdued core inflation would strengthen the case for Canadian easing, while broader price increases would weaken it. The Fed’s September 16 decision and the Bank of Canada’s deliberations summary that day will provide the next policy signals. Canada’s next scheduled rate decision arrives October 28 with a new Monetary Policy Report.
Bottom line
For now, the jobs loss strengthens the argument for eventual relief, but persistent energy inflation makes that relief harder to deliver. Fixed borrowers face the more immediate market risk because funding costs can move between central bank decisions. Variable borrowers remain exposed to what the Bank and lenders actually do next.
Anyone renewing this fall faces an uncertain timetable, because weaker hiring alone does not guarantee cheaper borrowing. More lasting relief would require confidence that inflation is easing despite the energy shock, or clearer evidence that demand is weakening. Until then, the latest jobs report offers a reason for caution, while oil explains why that caution may not translate into lower rates.
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