Expectations for a December rate pause strengthened Friday after stronger-than-expected employment data showed continued resilience in Canada’s labour market. Statistics Canada reported a 67,000-job increase in October as the unemployment rate edged down two percentage points to 6.9%.
“With the jobless rate dipping back below 7% and wages staying firm, it appears that the BoC will indeed pause in December,” wrote BMO’s Douglas Porter.
TD’s Leslie Preston agreed, saying the latest data give the central bank room to “let the 275 basis points of rate cuts in this cycle work their way through the economy.”
With Canada’s job market “defying gravity” in October, Michael Davenport of Oxford Economics went a step further, saying that the Bank of Canada is likely done cutting interest rates. “Today’s stronger-than-expected job report reinforces that view,” he wrote.
Bond markets appeared to share the view that rate cuts are at least paused for the time being, with the 5-year Government of Canada yield climbing to 2.68% from 2.62% earlier in the day.
Labour market shows resilience, though broader economic softness persists
While October’s job gains are encouraging, Canada’s underlying economic softness remains a concern. CIBC’s Benjamin Tal recently described the country as being in a “per-capita recession,” noting that trade tensions with the United States have contributed to an “abnormal” economic period.
Preston doesn’t mince words: “While this report shows some resilience in Canada’s labour market, it is not strength. Overall job market conditions remain soft.”
Echoing that view, Oxford Economics’ Davenport said, “Despite stronger-than-expected job gains in each of the last two months, slack persists in the labour market, and the longer-term trend in hiring remains subdued. We don’t think job growth will be sustained at this pace going forward.”
The three- and six-month averages for employment growth are holding around 20,000, which is “not spectacular, but solid enough,” says CIBC’s Andrew Grantham. The unemployment rate remains higher than it was at the start of 2025 and is up 0.3 percentage points from a year earlier.
U.S. trade policy remains a “significant risk”
RBC economist Nathan Janzen said industries most exposed to U.S. trade policy, including manufacturing and transportation, remain under pressure despite some recent improvement.
He cautioned that U.S. tariff policy “remains a significant risk,” and that Canada’s labour market is still weaker than a year ago, with the unemployment rate up 0.3 percentage points from last October.
Looking at the broader picture, Canada’s labour market is showing signs of recovery, but the real test will come in the months ahead, says Grantham.
“The coming months will likely be a truer test of just how quickly the labour market is recovering, as strong gains in September and October largely just offset the surprising weakness seen in the prior two months,” he noted. “We expect that employment gains will slow down again but, with population growth also decelerating, the unemployment rate should continue a gradual move lower during 2026.”
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Last modified: November 7, 2025