Expectations for a December interest rate hike intensified on Friday after stronger-than-expected employment data showed continued resilience in Canada’s labor market. Statistics Canada reported that 67,000 jobs were added in October and the unemployment rate edged down two percentage points to 6.9%.
“With the unemployment rate falling back below 7% and wages remaining firm, the Bank of Canada does appear to be pausing in December,” BMO’s Douglas Porter wrote.
TD Bank’s Leslie Preston agreed, saying the latest data gave the central bank room to “let the 275 basis points of this cycle rate cuts work their way through the economy.”
With Canada’s job market “defying gravity” in October, Michael Davenport of Oxford Economics went a step further and said the Bank of Canada may no longer cut interest rates. “Today’s stronger-than-expected jobs report reinforces this view,” he wrote.
The bond market also seems to believe that rate cuts are at least temporarily suspended, with the Canadian government’s 5-year Treasury bond yield climbing to 2.68% from 2.62% earlier in the day.
Labor market shows resilience despite lingering broader economic weakness
While October’s job gains were encouraging, underlying economic weakness in Canada remains a concern. CIBC’s Benjamin Tal recently described the country as being in a “per capita recession” and noted that trade tensions with the United States had led to “exceptional” economic times.
Preston put it bluntly: “While this report shows some resilience in the Canadian labor market, it is not strength. Overall job market conditions remain weak.”
Oxford Economics’ Davenport agreed, saying: “While job growth has been stronger than expected in each of the past two months, the labor market remains soft and the long-term trend in hiring remains subdued. We do not believe job growth will continue at this pace going forward.”
CIBC’s Andrew Grantham said the three- and six-month average job growth remained around 20,000, “not spectacular but stable enough”. The unemployment rate remains higher than the level at the beginning of 2025, up 0.3 percentage points from the previous year.
U.S. trade policy remains ‘significant risk’
RBC economist Nathan Jensen said despite recent improvements, industries most affected by U.S. trade policy, including manufacturing and transportation, remain under pressure.
He warned that U.S. tariff policy “remains a significant risk” and that the Canadian labor market is still weaker than a year ago, with the unemployment rate rising by 0.3 percentage points from October last year.
Grantham said that from a broader perspective, Canada’s labor market is showing signs of recovery, but the real test will come in the coming months.
“The coming months are likely to be a truer test of the speed of the labor market recovery, as strong growth in September and October largely offset the surprising weakness of the previous two months,” he noted. “We expect job growth to slow again, but with population growth also slowing, the unemployment rate should continue to gradually decline in 2026.”
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Last modified: November 7, 2025
