Canada's economy added 18,200 positions in June, falling well short of the 87,800 created in May but slightly above the consensus estimate of 10,000. The unemployment rate dipped to 6.5% from 6.6% in May, defying expectations of stability. Despite these gains, economists argue the data is insufficient to alter the Bank of Canada's interest rate trajectory, with the overnight lending rate remaining at 2.25% for five consecutive decisions.
RBC: Labour market 'still not strong'
Nathan Janzen, an economist at RBC Economics, described the labour market as "still not strong," noting that the unemployment rate remains higher than normal. Year-to-date job creation is negative by 6,000 positions, and slower growth is anticipated as Canada's population contracts. However, Janzen pointed to signs of economic recovery in the second quarter after a winter stall, with tariffs on U.S. exports declining under the Canada-U.S.-Mexico Agreement (CUSMA), despite the White House declining to renew the deal on July 1. Oil prices have also dropped from peaks during the U.S.-Iran crisis. RBC expects the Bank of Canada to hold rates at 2.25% through 2026, rising to 3.25% by end of 2027.
BMO: 'Pass, but not robust'
Douglas Porter, chief economist at BMO Financial Group, cautioned against interpreting the report as a show of strength. Most new jobs were part-time and concentrated in service sectors like hotels, retail, and restaurants, boosted by the World Cup. Meanwhile, factories and construction recorded notable weakness. On the positive side, hours worked increased, supporting second-quarter GDP, and average hourly wages rose 3.3% year-over-year, slightly below 2025's average. Porter graded the report a "decent 57.6 — a pass, but not robust." He noted that moderate job creation has returned after the labour market lost about 110,000 positions between January and April 2026, but population contraction means even modest job growth can lower the unemployment rate.
Outlook for July 15 rate decision
The Bank of Canada's next interest rate announcement is scheduled for July 15. Economists widely expect the central bank to maintain the current rate of 2.25%, citing the need for more sustained economic improvement before any tightening. The June jobs data, while showing progress, is deemed insufficient to shift policy.
