Canadian Labour Market Strength Fails to Prompt Rate Hike Bets

The Canadian labour market showed remarkable strength in July, exceeding expectations with a gain of 75k jobs and an unemployment rate of 6.4%, its lowest since 2024.

This robust job growth has been ongoing for six months, outpacing population growth, but despite the positive trend, TD Securities economists Robert Both and Emma Lawrence believe the Bank of Canada will maintain its hold through 2026 and return to neutral policy in early 2027.

The July employment data revealed that private sector job growth was particularly strong, with an even split between full-time and part-time employment. Hours worked rose by 0.6% month-over-month, while wage growth slowed slightly to 3.0% year-over-year due to base effects.