Canada employment data highlights an inconsistent rebound in the labor market – RBC Economics

Canadian Job Market Recovery Remains Uneven in December

December's slight increase in employment, alongside a higher unemployment rate, suggests that Canada's job market is on the mend, though the process is likely to be irregular and gradual. This perspective is highlighted by Claire Fan, Senior Economist at the Royal Bank of Canada.

Small Job Gains Accompanied by Higher Unemployment

Last month, employment edged up by only 8,000 positions, a notable slowdown compared to the strong 181,000 jobs added over the previous three months. The unemployment rate climbed to 6.8% from 6.5%, largely because more people entered the labor force in search of work, rather than due to a surge in layoffs. Despite this uptick, the rate remains lower than October's 6.9% and the recent high of 7.1% recorded in September.

Stabilization in Trade-Exposed Industries

Industries sensitive to international trade, such as manufacturing and transportation and warehousing, faced ongoing job reductions during the summer months. However, by the end of the year, conditions in these sectors had steadied. In December, employment across these two industries was virtually unchanged from the previous month and stood 22,000 higher than in December 2024.

Outlook Aligns with Central Bank Expectations

The latest employment data points to a slow but steady improvement in Canada's labor market, consistent with the Bank of Canada's projections. This trend supports the central bank's current inclination to keep interest rates unchanged throughout this year, with potential rate increases anticipated in 2027.