Canada: Gradual improvement outlook on labour market – RBC

Royal Bank of Canada (RBC) economist Claire Fan notes Canada’s labour market lost 42,000 jobs in August, partly reversing earlier gains and leaving modest year-to-date job growth. She emphasizes structural factors like demographics and weaker immigration as key drags. Despite this, she highlights improving unemployment, stronger hours worked, and expects solid domestic demand to support further labour market improvement into 2027.

Structural drags but improving indicators

"Headline job growth is notoriously volatile, and we continue to continue to point to structural changes, including rising retirement from aging demographics and slowing population growth from weak immigration as bigger drivers behind dismal job growth in Canada this year."

"As employment is impacted by those structural changes, we have been relying more on the unemployment rate as a better gauge of cyclical conditions."

"In August, the unemployment rate held onto improvements in the prior months."

"This is in line with our own analysis, that continues to expect U.S. tariffs will have pronounced, but targeted effect on Canada’s labour market –we estimated 0.4% of jobs are directly involved in producing the goods that are on the new Section 338 tariff lists."

"Near-term labour market impacts will be watched closely but we continue to expect solid domestic demand, as was seen in GDP data in Q2 will support further labour market improvement into 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)