Canada’s labour market remains resilient – although Trump’s tariffs are looming large
Canada’s labour market posted a stronger-than-expected performance in June, dimming hopes of a Bank of Canada interest rate cut this month even with the threat of huge US tariffs looming into view.
Statistics Canada said on Friday that the economy added a net 83,100 jobs last month while the unemployment rate fell, sliding to 6.9% and defying expectations of a slight increase.
Royal Bank of Canada (RBC) assistant chief economist Nathan Janzen highlighted that while monthly labour market data is “notoriously volatile,” the June increase marked the biggest jobs increase since the end of last year.
He said the gain – and lower unemployment – suggested a “bounce-back” was underway in business sentiment, although it remains to be seen how US president Donald Trump’s threats to impose a 35% blanket tariff on Canadian imports starting August 1 will affect that outlook.
The current economic landscape means the central bank is unlikely to bring rates lower at its next meeting, Janzen said.
“While downside economic growth risks remain, the June labour market data is consistent with our base-case assumption that the BoC will not cut interest rates further after skipping reductions at each of the central bank’s last two policy decisions,” he wrote.
Bank of Montreal (BMO) managing director, Canadian rates and macro strategist Benjamin Reitzes said the figures were “pretty decent” overall, although most of the jobs gains arrived in part-time employment.
But he said the storm clouds gathering over the Canadian economy mean there’s plenty of reason to be sceptical about its underlying strength.
Still, unless inflation posts an unlikely dip next week, he said there’s little evidence that the Bank of Canada will step off the sidelines and trim rates at the end of the month.
StatCan’s report showed that sectors of the economy especially sensitive to trade are still underperforming, although manufacturing employment posted an unexpected gain – jumping by 11,000 and increasing for the first time in five months.
While part-time jobs were responsible for the majority of the increase in employment, the economy also added 14,000 full-time roles. But annual wage growth slowed month over month, falling to 3.2% compared with 3.4% in May.
Trump’s threat on Thursday, delivered in a public letter to prime minister Mark Carney, jolted financial markets and sparked fears that the trade war could be about to ramp up even further.
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