Canada's Job Market Sees Significant Growth in July, Yet Challenges Remain

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July's job growth in Canada signals recovery, but with ongoing challenges in the labor market. Economists caution against premature optimism as wage growth slows and uncertainties persist.

OTTAWA – In a notable development for the Canadian job market, July witnessed the addition of 75,000 jobs, marking a significant step towards economic recovery. Despite this positive trend, economists emphasize that the path ahead remains challenging before the Bank of Canada contemplates any tightening of its monetary policy. According to Statistics Canada, the unemployment rate has dipped to 6.4 per cent, the lowest it has been in two years, reflecting a more favorable labor landscape.
Prior to the announcement, economists surveyed by Reuters had predicted a modest increase of just 15,000 jobs, making the actual figures a surprise. The job growth reported for July was balanced between full-time and part-time positions, with Ontario leading the way by adding 52,000 jobs. Notably, since April, Canada has seen a total increase of 181,000 jobs, and a year-over-year comparison shows an increase of 196,000 jobs.
CIBC senior economist Andrew Grantham commented on the surprising strength of the job growth, indicating it aligns with the positive trends reflected in Canada’s GDP figures. However, he cautioned that the recovery is still in its early stages, with significant slack remaining in the economy. This suggests that for the Bank of Canada to consider interest rate hikes, further improvement is essential.
Statistics Canada’s report highlights that the unemployment rate has decreased by half a percentage point compared to the same period last year, indicating that more job seekers have successfully found employment. Yet, RBC assistant chief economist Nathan Janzen pointed out that the labor market has not yet reached its full potential. Despite the drop in the unemployment rate, it remains higher than usual, and wage growth exhibited a slowdown in July.
Average hourly wages increased by 2.8 per cent in July compared to the previous year, although this growth rate is a deceleration from the 3.3 per cent increase recorded in June. The majority of job gains in July came from the wholesale and retail trade sectors, which added 21,000 jobs, although it still reflects a net loss of 50,000 jobs compared to last year. The finance, insurance, real estate, rental, and leasing sectors contributed an additional 18,000 jobs, while professional, scientific, and technical services added 17,000 jobs. Conversely, the public administration sector saw a reduction of 15,000 jobs, and the agricultural sector lost 9,600 jobs.
Desjardins managing director Royce Mendes expressed that while the latest job figures provide evidence of businesses adapting to ongoing trade-related uncertainties, the labor market still has a considerable distance to cover before achieving full recovery. He also suggested that any potential interest rate hikes by the Bank of Canada are unlikely before 2027.
Despite the substantial job gains in July, Mendes noted that the labor market has not yet returned to a state of full health, as indicated by the slowing pace of wage growth, which is now closely aligned with inflation rates. The Bank of Canada has maintained its key policy rate at 2.25 per cent for the sixth consecutive meeting as of mid-July. Financial markets indicated a 96 per cent probability that the central bank would opt for a hold during its upcoming meeting on September 2, according to LSEG Data & Analytics.
Among young people, the unemployment rate held steady at 12.6 per cent in July, which is a decrease of 1.9 percentage points from the previous year. Grantham remarked that the current summer period is certainly more favorable for young job seekers compared to the last two years, reflecting gradual improvements in the job market.

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