The job market in Canada added a surprise 83,000 new jobs in June in the face of the trade war with the United States, according to Statistics Canada.
Still, the outlook remains uncertain, and most experts aren’t ready to celebrate just yet even as unemployment dropped slightly.
“Trade risks remain with Canada added to a growing list of countries facing threatened new tariff hikes from the U.S. administration on August 1,” says economist Nathan Janzen at the Royal Bank of Canada.
“The most severely damaging international trade scenarios have yet to develop, and weakness in trade exposed sectors has yet to spill over significantly to other industries.”
The job gains in June also marks the first monthly increase to the labour market since January, after many business sectors laid off workers in anticipation of negative impacts from U.S. President Donald Trump’s tariffs – especially for Canadian manufacturing.
The headline figures came as a surprise to most analysts who had been expecting unemployment to rise by 0.1 per cent to 7.1 per cent, and predicted there would be minimal or zero job growth in June compared to May.
A strong job market can help weather the storm from tariff pressures on businesses and consumers alike, including higher prices for goods and services that get passed onto customers. However, this may also leave room for the Bank of Canada to leave interest rates as they are for a while.
“Canada’s job market is on fire — Take that, Trump, we’re just tougher and more resilient north of the border,” says vice president and head of capital markets economics Derek Holt at the Bank of Nova Scotia.
“The caveat is that the strong gain makes it even less likely that the Bank of Canada embraces further easing anytime soon”
Why is Canada adding more jobs during a trade war?
Statistics Canada reports mainly on raw data, so it is up to experts like economists to analyze the trend behind the numbers – including how businesses are adapting to changing consumer and trade sentiments as a result of tariffs and the trade war.
Of the 83,000 total new jobs added, 70,000 were in part-time work, and 62,000 out of the total were in the so-called ‘core-aged’ demographic (25 to 54 years old).
Get daily National news
Among the various sectors that saw strong job growth were those of retail and wholesale trade, health care and social services, science and technical services, manufacturing, as well as hotel and food services.
With the top job growth being in retail and wholesale trade, in addition to gains in the hotel and food services sectors, one could see how businesses could be benefiting from consumers looking for more patriotic ways to spend their money locally.
“Canadians are just spending it here, (with) strong spending at bars and restaurants as one indication of staycation spending,” says Holt.
“Instead of travelling to the U.S. during March break and summer vacations, Canadians are spending it here and keeping jobs here.”
Manufacturing is particularly sensitive to Trump’s tariff policies, especially in the automotive and parts industries, but it rebounded in June with nearly 11,000 new jobs added.
Although this jobs report seems like good news for now to most industry experts and economists, the trade war continues to evolve, and most are not letting their guard down.
“Given all the uncertainty in the economy, it’s certainly good news, but at any given point in time there are hundreds of thousands of positions in Canada sitting open. So that does often take a little bit of a time to wash through the system,” says president Dan Kelly at the Canadian Federation of Independent Business.
“I don’t think we should be celebrating one month’s job numbers. We’ll be watching what the trend line shows over the next little while.”
Student employment continues to struggle
With the ‘core age’ working demographic making up most of the job growth in June, some of the other groups which continue to struggle may be getting overshadowed – namely students in summer positions.
The report from Statistics Canada shows in June, the unemployment rate for returning students (those aged 15 to 24 who were in school full-time in March and plan to return in September) was 17.4 per cent, up from 15.8 per cent in June 2024 and up 7.2 percentage points from the record low observed in June 2022 of 10.2 per cent.
The agency also notes how among the student summer seasonal work demographic this was the highest unemployment rate for the month of June since 2009 (excluding the pandemic period).
Students struggling to find work when they are not in school continues to be a challenge, especially with so many taking on student debt.
What does this mean for interest rates?
The Bank of Canada has held its benchmark interest rate at 2.75 per cent since March of this year, including after the most recent meeting of its members in June, and cited the uncertain outlook for the trade war as a reason to not make any sudden moves on borrowing costs.
The central bank is especially not in a hurry to cut rates given the perceived resilience so far in both economic output as well as the labour market.
“Forget about that July 30 cut…optically, it would be exceedingly difficult for them (the Bank of Canada) to cut after year-to-date and June jobs numbers like these.” says Holt.
“How can you adjust policy when you haven’t a clue what trade and fiscal policies might unfold?”
The next monetary policy decision will be announced by the central bank on July 30.
Comments