Canada adds 75,100 jobs as jobless rate falls to 6.4%

Canada's job market delivered its strongest three-month run in years, adding 75,100 positions in July and pushing the unemployment rate to a two-year low of 6.4%, far exceeding the roughly 20,000 gain economists expected.

"The latest jobs numbers add to the evidence that businesses are finding ways to navigate the current trade-related uncertainty," said Royce Mendes, head of macroeconomic strategy at Desjardins. "That said, even with the big gains seen in July, the labor market isn't back to full health."

The Canadian dollar rose about 0.5% to C$1.3959 per US dollar, while the 5-year government bond yield climbed roughly 3 basis points as investors weighed the strong report against a surprise U.S. job loss of 23,000 in July. Average hourly wages for permanent employees rose 3.0% from a year earlier, slowing from 3.7% in June and softer than the 3.4% economists expected.

The report gives the Bank of Canada little reason to move. Officials have held the policy rate at 2.25% since October 2025, and money markets price a 96% probability of no change at the Sept. 2 meeting. The bigger risk sits outside the labor market: President Donald Trump has threatened 50% tariffs on certain Canadian goods that could take effect Aug. 19.

Where the gains came from

Private-sector employment rose by 57,900 in July and the ranks of the self-employed expanded by 44,400, offsetting a drop of 27,000 in public-sector jobs. Full-time work added 38,600 positions and part-time 36,600. Wholesale and retail trade led the gains with 21,000 new jobs, followed by finance, insurance and real estate at 18,000 and professional services at 17,000.

Ontario anchored the national expansion, adding 52,000 positions and pushing its local unemployment rate to 6.8%. The three-month net gain of 181,100 more than reverses the sharp pullback recorded early in the year, when the jobless rate hit 6.9% in April.

The labor force grew by 60,500 in July and the participation rate edged up 0.1 point to 65.1%. The job-finding rate — the share of unemployed people who secured work from one month to the next — rose to 20.8% from 18.5% a year earlier, though it remains below the pre-pandemic average of 26.6%.

Wage slowdown shapes the policy path

The cooling wage print matters more to the Bank of Canada than the headline hiring number. Slower pay growth eases pressure on service-sector prices, where labor costs are a large input, and gives policymakers room to keep rates on hold even as the economy strengthens. Statistics Canada's preliminary data shows annualized growth of 3.4% in the second quarter after back-to-back quarterly contractions.

"While July's report is overwhelmingly positive, the overall trend still looks a lot more like stabilization from last year's softness rather than true acceleration," said Laura Ulrich, director of economic research at jobs site Indeed. "But three straight months moving in the right direction is exactly how turning points begin."

The last time Canada's jobless rate fell to this level, in July 2024, the Bank of Canada was mid-cycle in a rate-cutting campaign that ultimately brought the policy rate down to 2.25%. The current path looks different: with wage growth now running near the rate of inflation, markets see no hike until at least 2027, according to Desjardins' Royce Mendes.

For investors, the picture is solid but not clean. A stronger economy supports the Canadian dollar and corporate earnings, but the tariff threat could change the mood quickly. The next two weeks — until the Aug. 19 tariff deadline — will decide whether the confidence holds.

This article is for informational purposes only and does not constitute investment advice.