Friday's jobs report could quietly change the rate calculus
Canada's labour market is expected to post a modest gain when Statistics Canada releases its July Labour Force Survey on August 7, a report that economists at RBC say will test whether the gradual improvement seen in recent months is holding.
Nathan Janzen, assistant chief economist at RBC Economics in Toronto, and economist Abbey Xu are forecasting a gain of 5,000 jobs in July, with the national unemployment rate holding steady at 6.5%. That would build on increases recorded in both May and June, even as total employment remains slightly below its 2026 starting point.
"Recent labour market indicators, including job postings, have changed little heading into July, suggesting hiring demand has continued to stabilize despite ongoing trade uncertainty," Janzen and Xu wrote in their analysis.
Part-time gains and wage drift warrant watching
The quality of any gains will carry as much weight as the headline number. June's increase was driven primarily by part-time employment, while full-time job creation was more limited.
Average hourly wage growth picked up modestly in June after a deceleration in May, though the RBC economists expect that pace to continue drifting lower as slack in the labour market remains elevated by historical standards.
Per-worker conditions have nonetheless improved steadily since the labour market shed thousands of jobs in April. The unemployment rate now sits 0.4% below its level a year ago and well below the 6.9% peak reached in April 2026, according to Statistics Canada.
Janzen and Xu noted the 6.5% rate "remains consistent with per-worker market conditions broadly improving."
Separately released Survey of Employment, Payrolls and Hours data showed employment up 95,000 in the first five months of 2026, a stronger read than the headline Labour Force Survey, with hours worked tracking firm.
Rate hold path stays intact ahead of September decision
The Bank of Canada held its overnight rate at 2.25% on July 15, for the sixth consecutive time, with its next announcement set for September 2.
Brokers monitoring variable-rate mortgage exposure will note that divisions among Bank of Canada decisionmakers on the economy's resilience have surfaced in recent governing council deliberations, even as most forecasters maintain a hold call for September.
"A July report broadly in line with our expectations would reinforce our base case forecast that Canada's labour market is continuing to stabilize, supporting the view that the economy remains on a path of modest, but steady expansion," Janzen and Xu wrote.
On the trade front, RBC projects Canadian exports to decline 1.2% in June on lower oil prices, while imports are expected to edge up 0.3% on moderate motor vehicle shipments. The merchandise trade surplus is expected to narrow to $3.1 billion from $4.2 billion in May.
RBC economist Claire Fan previously said that "interest rates at the lower end of the estimated neutral range are still appropriate." Meanwhile, BMO chief economist Doug Porter, noted the central bank's medium-term inflation forecast had held steady despite oil price volatility, a signal consistent with a September hold.
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