July’s jobs report marks a turning of the tides as the Canadian economy embarks on a path of expansion.
Canada added 75,000 jobs last month, which vastly exceeded expectations and brought the unemployment rate down to 6.4 per cent—the lowest in two years.
Looking ahead, we expect Canada’s economic recovery to continue after the contraction earlier this year due to trade friction with the United States.
The unemployment rate should continue on its downward trend, especially since population growth—and therefore workforce growth—has not only slowed, but reversed. Canada’s population has declined since its peak in the second quarter of 2025 due to more restrictive immigration policies.
That said, the Bank of Canada is still expected to hold its key interest rate for the rest of 2026 year due to uncertainty regarding the outcome of trade negotiations with the U.S.
Canada also seems to be finding its footing in a world with constant trade uncertainty. Investments have increased in recent months, which will have a positive effect on jobs and the economy overall.
Wage growth reached 2.8 per cent on annual basis—down from 3.3 per cent in June but still above headline inflation.
Other signs of recovery are ample in Friday’s data. Job gains were entirely concentrated in the private sector and self-employment, along with a favourable summer job market for returning students.
The private sector added 58,000 jobs and the number of self-employed workers rose 44,000, which more than offset the 27,000 drop in the number of public sector employees.
The gains in the private sector and in self-employment continue a trend going back to April, which is a good indicator of rising demand.
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The youth unemployment rate dropped to 12.6 per cent. For returning students, this summer is markedly better than last year; the unemployment rate for returning students aged 20 to 24—those most likely in post-secondary education—fell to 6.3 per cent, the lowest since July 2018.
Wholesale and retail trade led the increases across industries with 21,000 additional jobs, a partial reversal of the downward trend from earlier this year due to uncertainty in the trade situation with the U.S.
Finance, insurance and real estate also added 18,000 jobs, followed by professional, scientific and technical services with 17,000 jobs and construction at 16,000 jobs. There are signs that with government incentives, the construction sector is picking up.
