A stronger-than-expected July report complicates the Bank of Canada's next move
Canada's labour market delivered a decisive beat in July, with Statistics Canada reporting 75,000 new jobs and the unemployment rate falling to 6.4%, its lowest level in two years.
The result strengthens the case that the economy is on a genuine recovery path, while sharpening the debate about what the Bank of Canada (BoC) does next.
The July figure pushed cumulative employment growth since May to 181,000 positions, the strongest three-month run since before US tariffs began disrupting the Canadian economy.
Nathan Janzen, assistant chief economist at RBC Economics in Toronto, framed the result as encouraging while noting its limits.
"The labour market is not yet strong — the unemployment rate is still higher than normal, and wage growth slowed in July. But it has been improving despite still significant US tariff uncertainty and higher energy prices."
What the data means for the Bank of Canada
With the BoC's policy rate sitting at 2.25% since October 2024, the July report makes a further cut difficult to justify, but falls well short of building a case for hikes.
Debate over whether the Bank of Canada could raise interest rates before the end of 2026 has grown louder in recent weeks amid rising oil prices and ongoing tariff pressure.
Charles St-Arnaud, chief economist at Servus Credit Union in Alberta, said the data validates the central bank's recent cautious optimism.
"For the Bank of Canada, today's numbers confirm their view that the economy is improving and suggest stronger economic momentum," he said.
"However, the downside risk to the outlook remains, due to US trade policy uncertainty."
Royce Mendes, managing director at Desjardins in Toronto, pointed to a longer timeline for any rate shift.
"The latest jobs numbers add to the evidence that businesses are finding ways to navigate the current trade-related uncertainty," he said, adding that "even with the big gains seen in July, the labour market isn't back to full health. As evidence of that, the annual pace of wage growth decelerated further … right around the rate of inflation."
Mendes does not expect a BoC rate hike until 2027.
Those views come as new US tariff threats cloud Canada's housing outlook, with US President Donald Trump having announced 50% tariffs on a range of Canadian goods set to take effect August 19.
Wages and where the jobs were gained
Average hourly wages rose 2.8% year-over-year in July, according to Statistics Canada, decelerating from 3.3% in June.
Sector gains were led by wholesale and retail trade, up 21,000, followed by finance, insurance, real estate, rental and leasing at 18,000, and professional, scientific and technical services at 17,000.
Construction added 16,000 positions and manufacturing contributed 11,000. Public administration shed 15,000 roles.
Ontario accounted for roughly two-thirds of the national gain, adding 52,000 jobs to bring its provincial jobless rate to a two-year low of 6.8%.
British Columbia added 18,000 positions.
For brokers navigating an environment shaped by rate stability and lingering tariff risk, Friday's report offers a constructive data point — one that supports continued activity without meaningfully changing the outlook for borrowing costs.
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