Canada: Labour market steadying with modest improvement – RBC

Royal Bank of Canada (RBC) economist Nathan Janzen notes that Canadian labour markets showed further signs of stabilisation in June, following a stronger improvement in May. Employment rose modestly, while per-worker conditions improved and the unemployment rate edged down to 6.5%. Janzen highlights softer population growth, firmer economic data and lower U.S. tariff rates as supporting factors, and expects further unemployment declines later in 2026.

Labour data supports gradual recovery view

"Canadian labour markets showed further signs of steadying in June after a larger improvement in May."

"The employment increase itself in June (+18k) left the measure still down 6k on net for the year."

"But we continue to think that slower employment gains should be expected given a sharp slowing in Canadian population growth."

"Critically, controlling for changes in the demographic backdrop, per-worker labour market conditions held onto a larger-than-expected improvement in May with the unemployment rate edging down to 6.5% in June from 6.6% the prior month, led by a pullback in the youth unemployment rate on an improved summer job market."

"Against that backdrop, the June labour market data is broadly consistent with our own base-case that Canada's economy is broadly still improving on a per-person and per-worker basis and we continue to look for the unemployment rate to edge down further over the second half of the year."