Canada’s economy appears to be slowly turning a corner, but many economists say the June job numbers released on Friday will not be enough to move the dial on interest rates . The economy added 18,200 positions in June, well below the 87,800 created in May, but still above the consensus call for 10,000, while the unemployment rate fell to 6.5 per cent from 6.6 per cent in May. Economists had called for it to hold steady. The Bank of Canada has held its overnight lending rate at 2.25 per cent in its past five decisions. Here’s what the latest job numbers mean for the economy and the upcoming Bank of Canada interest rate call on July 15. ‘Still not strong’: RBC “The labour market is still not strong — the unemployment rate is still higher than normal,” Nathan Janzen, an economist at RBC Economics, said in a note on Friday. For the year, job creation remains in the red by 6,000 positions and he said slower job growth is likely ahead given that Canada’s population contracted recently. “But economic growth data has also shown signs of picking up in (the second quarter) after stalling over the winter,” he said, adding that tariffs on exports to the United States continue to “drift lower” under the protection of the Canada-U.S.-Mexico Agreement (CUSMA), which remains in force despite the White House declining on July 1 to renew the deal. Oil prices have dropped well off the highs they hit during the worst of the U.S.-Iran crisis. Janzen said the economy is improving on a “per-worker basis,” with RBC calling for the unemployment rate to continue to fall. RBC expects the Bank of Canada to hold interest rates at their current level of 2.25 per cent out to the end of 2026 and for rates to rise to 3.25 per cent by the end of 2027. ‘Pass, but not robust’: BMO “While an encouraging result overall, one shouldn’t mistake this as a show of strength,” Douglas Porter, chief economist at BMO Financial Group, said in a note. He said most of the jobs added were part-time and in service sectors such as hotels, retail and restaurants that got a boost from the World Cup. Meanwhile, “notable weakness” was recorded in factories and construction, he said. On the positive side, hours worked rose, which he said will help lift second-quarter gross domestic product, and average hourly wages rose 3.3 per cent year over year, slightly below 2025’s average increase. “Overall, our grading rates this report at a decent 57.6 — a pass, but not robust,” he said. Porter said it looks like a “moderate” rate of job creation is back after the labour market took a massive hit at the start of 2026, when it lost about 110,000 positions between January and April. However, he said it currently doesn’t take much job growth to pull down the unemployment rate as the population contracts. “On balance, there’s not much here to tip the scales for the Bank of Canada,” he said, calling for interest rates to stay on hold for the rest of the year. ‘Some leeway’: National Bank of Canada “Overall, June’s data confirms that the labour market is not as concerning as it was a few months ago,” Matthieu Arseneau and Alexandra Ducharme, economists at National Bank of Canada, said in a note. The economy added about 105,000 positions during May and June, with much of the gain coming from the private sector, they said. Improvement in the youth job market was “encouraging” as the unemployment rate for those aged 15 to 24 fell to 12.7 per cent from 14.3 per cent to clock in at its lowest level since May 2024. However, “pockets of weakness” lurk, including in manufacturing, where losses since the start of trade troubles with the U.S. total 53,000, the pair said. “Uncertainty continues to hang over Canadian companies due to the lack of clarity regarding their access to the U.S. market,” they said, adding it’s no wonder business hiring plans look soft since 12 per cent of employment in Canada depends “directly or indirectly” on exports across the border. Slack is still dogging the Canadian labour market in general, they said, so pressure on wage growth is “contained.” “This gives the central bank some leeway before it needs to worry about second-order effects (wage push inflation) of the recent surge in inflation,” they said. • Email: gmvsuhanic@postmedia.com Canada’s unemployment rate ticks down to 6.5%Posthaste: The Bank of Canada’s neutral rate might be too high — by 50 basis points — says this economist
Canada’s June job numbers not enough to move the dial on interest rates, economists say
