Why the TSX hit a record at the open: Canada’s 65,500 job loss lifts odds of a September BoC cut

Bay Street didn’t need long to render a verdict on August’s labor shock. Within moments of Friday’s opening bell, the S&P/TSX Composite punched up to a fresh record, reflecting a swift repricing of interest-rate expectations after Canada shed roughly 65,500 jobs and unemployment climbed to 7.1%. In market terms, that combination—another negative employment print and a higher jobless rate—nudges the Bank of Canada toward action at its September 17 meeting and lowers the equity market’s discount rate, a potent mix for index-level gains.
The mechanics behind the rally are familiar. When labor slack widens and inflation remains contained, rate-sensitive assets typically outperform as bond yields ease and financial conditions loosen. Friday’s tape fit that pattern: investors leaned into exposure that benefits from a gentler rate path, while keeping an eye on commodity moves that often steer Canadian equities. The early push also piggybacked on a multi-week trend of calmer long-bond trading, which has reduced the valuation headwinds that dogged parts of the market earlier in the year.
Under the hood of the jobs report, the signal looked broad rather than idiosyncratic. Losses were concentrated in part-time roles but were not confined to a single industry cluster, and measures of joblessness continued to drift higher. For policymakers, that raises the risk of scarring if weakness persists—one reason markets increasingly price at least a 25-basis-point cut this month and leave room for follow-through if subsequent data back it up. Crucially, the Bank of Canada’s fixed announcement schedule puts the decision squarely in view, giving the market a near-term catalyst around which to organize positioning.
For equity investors, the practical question is how far this “easing trade” can run. A measured policy pivot typically supports duration-heavy segments—growth and quality compounders—while also providing breathing room to domestic cyclicals via cheaper capital. But the balance is delicate: another weak jobs print could flip the narrative from benign disinflation to growth risk, with implications for profit expectations across economically sensitive sectors. That’s why portfolio managers are pairing higher beta exposures with a focus on balance-sheet strength and free-cash-flow resilience.
Still, the path of least resistance into the opening hour was higher. A labor market that’s cooling faster than anticipated, a policy meeting less than two weeks away, and easing rate volatility set the stage for the TSX to set a new mark at the open. As long as inflation stays on a manageable trajectory and the Bank of Canada moves incrementally, the market has a plausible runway: lower yields to support multiples, and a still-global bid for Canadian resource and tech stories to buttress flows.