Canada’s labour market suffered a setback in July, with the economy shedding 40,800 jobs and pushing the national employment rate down to 60.7%, its lowest level since November, Statistics Canada reported Friday. The decline erases much of June’s surprising gain of 83,000 jobs.

Despite the job losses, the unemployment rate held steady at 6.9%, hovering near a multi-year high. Economists surveyed by Reuters had expected modest job growth of 13,500 and a slight uptick in unemployment to 7%.

“Canada’s labour market snapped back to reality in July,” said Michael Davenport, senior economist at Oxford Economics, who warned that further weakness lies ahead. He forecasts as many as 140,000 more job losses by year-end, with unemployment climbing into the mid-7% range.

One of the hardest-hit areas has been manufacturing, where employment dropped by nearly 10,000 compared with July last year. The Bank of Canada has previously pointed to U.S. tariffs on steel, aluminium, and autos as a major drag on hiring in these industries. Marty Warren, national director of the United Steelworkers union, said around 1,000 members have already been laid off.

Job losses also piled up in the information, culture and recreation sector (down 29,000 positions), construction (down 22,000), and business, building and support services (down 19,000).

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