BoC Holds Firm as Canadian Labour Market Continues to Outpace Expectations

TD Securities economists Robert Both and Emma Lawrence point to Canada's strong labour market in July. The country added 75k jobs, exceeding expectations of a 20k print, with an unemployment rate at 6.4%. This is the lowest unemployment rate since 2024.

The private sector led job growth, with an even split between full- and part-time employment. Hours worked rose by 0.6% month-over-month, while wage growth slowed to 3.0% year-over-year due to base effects.

The Bank of Canada has been cautious in its assessment of the labour market, noting that conditions remain soft despite job growth. With unemployment still at a relatively high rate and core inflation below 2%, TD Securities expects the BoC to maintain its neutral policy through 2026 before shifting back to normal in early 2027.