Labour Markets Improve, but Momentum Remains Elusive

Employment stagnated in May and rose by rose 18,000 (+0.1 per cent). The labour force participation rate stayed the same at 65 per cent and the unemployment rate declined to 6.5 per cent. On a year-over-year basis, average hourly wages increased by 3.3 per cent.

Key insights

June’s labour market figures are somewhat encouraging, but they also underscore the persistent challenges facing Canada’s economy this year. Employment has increased in only three of the first six months of 2026, and the total number of jobs in June remained below December’s level. We expect this volatility to persist through the second half of the year.

This cautious outlook is also reflected in our latest Index of Consumer Confidence, which has remained subdued for much of the past year, signalling that households continue to be wary about the economic outlook. Looking ahead, the reopening of CUSMA negotiations is likely to create additional uncertainty as the U.S. administration pushes for trade concessions ahead of formal talks. At the same time, the recent breakdown of the Iran–U.S. ceasefire risks pushing oil prices higher again, adding to inflationary pressures and placing further strain on household budgets.

Demographic trends will continue to provide some temporary relief to labour market conditions. Canada’s population has contracted for three consecutive quarters, easing labour supply growth at a time when the economy is slowing. As a result, the unemployment rate has edged lower despite a decline in overall employment, as fewer workers are entering the labour force.