Canadian labor market remained on a flat trend in July, as the economy lost a token number of 2,800 jobs, marking the second decline in employment nearly in a row. The country’s unemployment rate was, however, kept unchanged at 6.4% as a result of a drop in labor market participation that followed jobs loss and made the joblessness statistic unchanged.
Wage hikes moderated at 5.2% y/y from 5.6% seen in February. The slowest rise was in the public sector, which possibly raises some interesting points for the larger economy and future policymaking by the Bank of Canada. Total cuts of rates are seen at 25 basis points, with overnight rates moving to 2.75% in Q3 2025, which would coincide with relatively modest growth expectations from the economy.
Employment gains were spread among 10 of the 16 major industries, led by a rise in the public sector and transportation and warehousing, which saw an increase by 20,000 and 14,500 jobs respectively. The large gains, however, were largely offset by equally large declines in wholesale and retail trade, where there was a loss of 44,100 jobs and in the financial services, real estate and insurance industry, which shed 15,000 positions.
Labor Market Resilience
Growth partly offset by these, as the total hours worked by industry were up 1.0% on the previous month, with strong outsized gains in Utilities, Agriculture as well Transportation and warehousing. Positive signals were seen even from the construction sector, where 0.45% gain in numbers employed was complemented by a 1.6% advance in hours worked.
However, the currency market had almost no reaction to the jobs report. The USD/CAD exchange rate kept trading almost steady, while the detail of the report revealed that the reduction was seen in part-time employment, filled by full-time positions, which keeps the underlying strength in the labor market.
Forward guidance is shifting toward the prospect of Bank of Canada rate decisions. Inflation keeps grinding lower from last year’s peak, and the economy is starting to slow in an obvious manner, so current guesswork runs rampant that the rate cuts will persist. The next policy meeting takes place September 4, where dependent on ongoing economic takes, there might be another rate cut.
All the while, the subtle shifts in the Canadian economy have attracted attention from the global financial community, comparing proactive rate moves in Canada with anticipated actions of the U.S. Federal Reserve. This has cast the country on the global stage, drawing comparisons between the two countries’ abilities to weather economic changes and interest rate fluctuations.
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