Canada’s better-than-expected
employment numbers
for a third straight month took economists by surprise, and most now seem to agree
interest rate cuts are done
for 2026.
The economy
added 54,000 positions
during November and the unemployment rate fell to 6.5 per cent from 6.9 per cent,
Statistics Canada
said on Friday. Economists had expected a loss of 2,500 jobs and for the unemployment rate to rise to seven per cent.
Here’s what economists think the
job numbers
mean
for the economy
and for the
Bank of Canada
.
‘Adds to hopes’: Continuum Economics
“The data adds to hopes … that the Canadian economy is proving more resilient to tariffs than expected,” Dave Sloan, a senior economist at
Continuum Economics/4Cast Ltd.
, said in a note, referring to the 2.6 per cent annualized rise in third-quarter gross domestic product (GDP) reported by Statistics Canada last week.
Three consecutive months of gains in September, October and November wiped away significant losses in July and August, though November’s increase was entirely due to a 63,000 jump in part-time work, which he said was “not so impressive” since full-time work fell by 9,400.
Still, the unemployment rate is at its lowest point since July 2024. Sloan said it’s possible the jobless rate has peaked, after hitting 7.1 per cent in August, and that the economy is perking up.
“Though a weak preliminary estimate for October GDP means this conclusion should be tentative at this point,” he said.
Either way, more jobs were created in November, while the number of people looking for work dropped, reversing a trend that had dogged the labour market over the past few years.
“A change in rates at next week’s (Bank of Canada) meeting already looked unlikely and this data suggests we may have reached the bottom for this easing cycle, though strong data needs to continue in early 2026 before the (Bank of Canada) starts to consider tightening,” Sloan said.
‘Head-scratcher’: CIBC
“Canadian employment data is often perplexing, but today’s release was a real head-scratcher,” Andrew Grantham, an economist at
CIBC Capital Markets
, said in a note.
He said there have recently been conflicting signals in the jobs market, including a loss of 56,000 positions, according to the September payroll data, while full-time jobs fell for the second straight month, as did the jobless rate and the number of people looking for work.
Grantham said he liked that the economy has added jobs over the past six months, despite major declines during the summer and a pullback in population and the size of the labour force.
“That said, the composition wasn’t quite as strong as the headline,” he said, since the gains were concentrated in the part-time and young-worker sectors.
But what really surprised the economist was the drop in the unemployment rate, which he said has to do with “a decline in participation, which continues to trend lower than demographics alone can explain.”
“We continue to expect that the Bank of Canada’s rate-cutting cycle has ended, although we doubt that the recovery we are currently seeing will remain strong enough to bring rate hikes before the end of 2026,” he said.
Jobless rate ‘eyepopper’: BMO
“The real eye-popper in today’s report is the massive four-tick drop in the jobless rate to 6.5 per cent,” Douglas Porter, chief economist at
BMO Capital Markets
, said in a note, adding that a slowing population growth is one of the major factors behind the improved unemployment rate.
“The report was not a wall-to-wall show of strength,” since full-time jobs fell, as did manufacturing positions, he said.
Still, total hours worked, excluding education, rose 1.4 per cent year over year, and average hourly wages rose 3.6 per cent over the same period.
“Coupled with inflation that has been running a tad hot of late, this (jobs report) quashes any lingering prospect of a near-term Bank of Canada rate cut,” Porter said.
He also said the odds of an interest rate cut in 2026 have shrunk.
“Indeed, the market is now dabbling with the possibility of rate hikes in 2026,” he said.
• Email: gmvsuhanic@postmedia.com
'Head-scratcher' jobs report has markets flirting with rate hike in 2026, economists say
2025-12-05 17:55:58
