Canada’s labour market showed modest improvement in June 2026. Employment increased by approximately 18,000 positions (+0.1 per cent), slightly exceeding consensus forecasts of roughly 10,000, while the unemployment rate edged down 0.1 percentage points to 6.5 per cent, its lowest level in nearly two years and well below last year’s peak of 7.1 per cent. The employment rate rose 0.1 percentage points to 60.8 per cent, while labour force participation held steady at 65.0 per cent.
Nearly all of the employment gains came from part-time positions (+17,500), concentrated in retail and wholesale trade, as well as accommodation and food services. BMO Capital Markets attributed much of the strength in these sectors to seasonal student hiring and increased summer tourism activity. Meanwhile, manufacturing (-17,000) and construction (-13,000) continued to shed jobs, reflecting a broader labour market stuck in a “no-hire, no-fire” holding pattern. Average hourly wages rose approximately 3.3 per cent year over year, up from 3.0 per cent in May.
While most provinces added jobs in June, results varied considerably by region. Even so, provincial unemployment rates remain unusually compressed, ranging from a high of 8.2 per cent in Newfoundland and Labrador to lows of approximately 5.4 per cent in Quebec and Manitoba.
Population and Labour Force Dynamics
Canada’s population contracted in 2025, marking the first annual decline on record since Confederation, although Statistics Canada has noted that the figures could be revised higher. Labour force growth has cooled correspondingly, falling from nearly 4 per cent in late 2023 to virtually no growth in recent months.
This compression in labour supply is a key reason the unemployment rate can decline even amid only modest job creation: fewer new jobs are required to absorb a shrinking pool of labour force entrants. BMO’s analysis of job vacancy and hiring data suggests the economy remains “short of work, not workers,” since the ratio of unemployed people to job vacancies has climbed from near 1:1 in 2022 to more than 3:1 today.
Implications for the Bank of Canada
We view June’s labour report as unlikely to shift the Bank of Canada’s current stance. We are maintaining our outlook for the Bank to hold its policy rate at 2.25 per cent at its upcoming decision and through the remainder of 2026. An improving but not yet robust labour market, combined with ongoing trade uncertainty, is likely to keep the Bank on the sidelines.
Slower population growth is also adding to the disinflationary backdrop, easing shelter costs. Rents were down 4.7 per cent year over year as of May, helping pull broader inflation measures toward the Bank’s target and reinforcing the case for the Bank to remain on hold.
Sources
Statistics Canada, The Daily — “Labour Force Survey, June 2026,” released July 10, 2026.
BMO Capital Markets, “Cdn. Jobs Get a Kick Out of World Cup” (EconoFACTS), July 10, 2026.
Independent Opinion
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