Canada’s labor market added 75,100 net jobs in July, far surpassing a Reuters poll forecast of 16,500 and driving the national unemployment rate down to a two-year low of 6.4%, according to data released by Statistics Canada. The robust employment gains, driven by increases in both full-time and part-time work, offer fresh evidence that the domestic economy is building momentum following a softer start to the year.
Employment Surge Defies Trade Pressures
Statistics Canada reported that July’s growth followed the creation of 87,800 jobs in May, bringing further resilience to an economy navigating international trade tensions and U.S. tariffs. Full-time employment rose by a net 38,600 positions, while part-time jobs increased by 36,600. Gains concentrated heavily in the private sector, led by wholesale and retail trade, finance and insurance, and professional and scientific services.
Did you know? The Canadian dollar strengthened 0.4% to a near eight-week high of C$1.3959 against the U.S. dollar—equivalent to 71.64 U.S. cents—following the release of the stronger-than-expected labor figures.
Wage Growth and Central Bank Outlook
The average hourly wages of permanent employees grew 3.0% year-over-year in July, cooling from a 3.7% increase in June. This metric, closely monitored by the Bank of Canada to gauge inflation expectations, reached its lowest level since a 2.8% increase recorded in February 2022.
The Bank of Canada maintained its key policy rate at 2.25% since last October. Central bank officials stated on July 15 that the economy is managing the uncertainty surrounding U.S. President Donald Trump’s tariffs and Middle East conflicts better than initially feared. Preliminary figures from Statistics Canada indicate annualized second-quarter growth could hit 3.4%, the highest in three years.
“The data add to the evidence that businesses are finding ways to navigate the current trade-related uncertainty. That said, even with the big gains seen in July, the labor market isn’t back to full health,” said Royce Mendes, managing director and head of macro strategy at Desjardins. Mendes added that the central bank will likely wait for more sustained recovery before considering tightening monetary policy.
Frequently Asked Questions
What was the unemployment rate in July?
The unemployment rate dropped to 6.4% in July, falling from 6.5% the previous month to reach its lowest level in two years, according to Statistics Canada.
How did job creation compare to economist forecasts?
Economists polled by Reuters had predicted a net gain of just 16,500 jobs and expected the unemployment rate to hold steady at 6.5%. The actual addition of 75,100 positions vastly outperformed those expectations.
What is the current status of Bank of Canada interest rates?
The Bank of Canada has kept its benchmark interest rate at 2.25% since October, and money markets currently do not price in a rate hike until next year.
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