Stronger-than-expected employment data
The Canadian labor market delivered a strong surprise in July, adding 75,100 new jobs and lowering the unemployment rate to 6.4%, the lowest it has been in two years. Economists had forecast a much smaller increase of just 20,000 jobs, making the actual outcome significantly better than expectations. The latest figures suggest the country’s economy is gaining strength and moving along a recovery path. These numbers were released by Statistics Canada on Friday and have already started to influence financial markets.
The release of the data sent the Canadian dollar to a session high, with the currency rising as much as 0.5% in response. Canada bonds initially saw a sell-off after the news, as investors processed the strong employment numbers. However, bond prices soon rebounded as traders also factored in a weaker-than-expected employment report from the U.S., which added another layer of complexity to market reactions.
Three-month employment gains
Looking at the three-month period from May through July, the labor market added 181,100 jobs. This is the largest quarterly employment gain since before U.S. President Donald Trump started implementing tariffs on Canadian goods. The job gains have largely been fueled by full-time positions, with most of the hiring concentrated in the private sector and among self-employed workers. In addition to new jobs, total hours worked across the economy increased by 0.6%, signaling broader participation in the workforce.
Trade uncertainty persists
While the strong job numbers are encouraging, ongoing trade tensions with the U.S. remain a major concern. President Donald Trump has warned of new tariffs on Canadian goods beginning August 19, and the possibility of these tariffs looms over the recovery. Such measures could slow down the momentum that has been building in the economy over the past few months, particularly given the already challenging trade environment.
Charles St-Arnaud, chief economist at Servus Credit Union, noted that the job numbers reinforce the Bank of Canada’s belief that the economy is on an improving trajectory. However, he emphasized that the outlook is not without risk, especially due to the ongoing trade uncertainty between Canada and the U.S. In an effort to resolve the issue, senior Canadian officials met with U.S. Trade Representative Jamieson Greer this week, seeking a solution before the August deadline.
In terms of specific industries, the biggest job gains in July were recorded in wholesale and retail trade, followed by finance, insurance, real estate, rental and leasing, as well as professional, scientific and technical services and construction. On the other hand, public administration experienced the largest employment decline during the same period. This decrease is part of a trend that has seen the public sector lose jobs for the first time since 2016, with the exception of the pandemic years. The drop in public sector jobs was mainly attributed to reduced employment in educational services.
The job market also showed some positive trends for returning students during the summer months. The unemployment rate for students aged 15–24 dropped by 2.4 percentage points compared to July 2025, though it remains above pre-pandemic levels. For older students aged 20–24, the unemployment rate hit 6.3% in July, which is the lowest it has been since 2018. Meanwhile, average hourly wages for full-time permanent employees rose by 3% over the past year, down slightly from the previous month’s 3.7% annual growth rate.