Wells Fargo Economics sees Canada’s labor market as soft but stabilizing after a strong May rebound, with employment growth under 1% year over year and gains concentrated in full-time jobs. The team expects the unemployment rate to stay within 6.5–7.1% and believes these conditions justify the Bank of Canada keeping policy on hold for now.

Soft but steady jobs back BoC patience

"Canada's labor market remains soft, though weakness earlier in the year was met with a sharp rebound in May. Even so, employment is up less than 1% from a year ago, underscoring the sluggish pace of hiring beneath the month-to-month volatility."

"Labor supply constraints are also easing only gradually. An aging workforce and slower immigration flows should continue to limit labor force growth, helping keep a lid on any significant increase in unemployment. As a result, we expect the jobless rate to remain broadly within the 6.5–7.1% range that has prevailed over the past 12–18 months."

"Following the strongest monthly employment gain since late 2024, some payback in June would not be surprising. Still, our broader assessment is that labor market conditions are stabilizing rather than deteriorating. "

"Wage growth remains positive but is no longer accelerating materially, consistent with labor demand that has softened enough to reduce inflation pressures but not enough to raise meaningful recession concerns. Taken together, the labor market argues for continued patience from the Bank of Canada, keeping policy on hold for the foreseeable future."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)