The Canadian labour market heated up in May, beating economists’ expectations and undermining the argument that the economy is in recession.
On Friday, Statistics Canada reported that the economy added 88,000 positions last month. It was the first significant employment gain since November, according to the agency.
A consensus of economists had predicted the number of jobs would rise by only 10,000.
At the same time, the unemployment rate fell to 6.6 per cent in May from 6.9 per cent the month prior. Economists had forecasted that the jobless rate would remain unchanged.
StatCan highlighted that the employment increase stemmed from more people working full-time. The job gains took place across industries, led by construction as well as transportation and warehousing.
Friday’s data “should silence the recession crowd,” Benjamin Reitzes, economist at BMO, wrote in a note to clients. “The economy isn’t booming, but it isn’t falling apart, either,” he added.
The labour force survey update follows a recent report showing that national gross domestic product contracted for two consecutive quarters, meeting the definition of a technical recession.
But experts have since argued that the economy isn’t behaving like a typical recession, where job losses tend to be more pronounced.
Still, the jobless rate remains above its pre-pandemic average of six per cent amid high economic uncertainty.
Negotiations on whether to extend the Canada-United States-Mexico Agreement haven’t yet concluded, while high energy prices continue to hurt Canadian households.
“The challenges facing Canadian job seekers persist,” Brendon Bernard, economist at Indeed Canada, said in an emailed statement.
“As the data roller-coaster this year shows, we shouldn’t be revising our perception of the labour market too much from just one month.”
StatCan noted that while youth unemployment declined to 13.4 per cent in May, the rate is well above the pre-COVID average of 10.8 per cent.
The agency added that students are seeing a better start to the summer job market than last year.
Andrew Hencic, economist at TD Bank, said in his note to clients that he continues to expect a bounceback in economic activity in the second quarter of 2026.
He said that the economy continues to operate below capacity, adding that he believes the Bank of Canada will keep the policy interest rate at 2.25 per cent next Wednesday.
As of Thursday afternoon, financial market odds for the announcement were just over 98 per cent in predicting a rate hold, according to data supplied by the London Stock Exchange Group (LSEG).
