May jobs report cools recession fears—But not the doubt

Advertisement 1This advertisement has not loaded yet, but your article continues below. The “unambiguously strong [jobs] report” should somewhat ease Bank of Canada worries about the economy after the negative GDP print, said BMO’s Benjamin Reitzes. Photo by David Kawai/BloombergArticle contentCanada’s jobless rate fell to 6.6 per cent in May as 88,000 positions were added into the economy, the first significant employment gain since November 2025, according to Statistics Canada’s labour force survey data released Friday.Sign In or Create an Accountor View more offersArticle contentHere’s

what economists had to say about the latest data and what it means for the Bank of Canada’s future interest rate decisions.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.We apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle content‘Ends recession debate’: CPA CanadaArticle contentTop StoriesGet the latest headlines, breaking news and columns.By signing up you consent to receive the

above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don’t see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe latest jobs numbers just about ends the recession debate, said Chartered Professional Accountants of Canada’s chief economist, David-Alexandre Brassard. The May report significantly beat expectations, bringing employment close to flat for 2026. The scale

of job creation, particularly in full-time roles, points to improving economic conditions rather than a downturn, he said.Article content“This is a blockbuster report that seemingly wipes away recession fears and points to a rebound in the second quarter following two quarters of contraction,” said Brassard, noting that the gains were broad-based, driven by sectors outside the public sector and industries impacted by tariffs.Article contentHe said the report also shows easing wage pressure, as a surge of new jobs helps slow wage growth caused by earlier

labour market tightness.Article content“That resilience comes as Canada looks ahead to the renewal of CUSMA,” he says. “We’re in a stronger position heading into these discussions, which is extremely important given ongoing global trade pressures.”Article contentArticle contentRead More Canada’s unemployment rate drops to 6.6% as economy gains 88,000 jobs Matthew Lau: Keep out of Tim Hortons’ hiring choices Advertisement 1Story continues belowThis advertisement has not loaded yet, but your article continues below.Article content‘BoC to stay on sidelines next week’: TD EconomicsArticle contentTD Economics director and

senior economist Andrew Hencic said the unemployment rate tumbling in May handily beat consensus expectations for a 10,000 gain, as employment gains outpaced labour supply. The labour force was little changed at 3,800, leaving the participation rate unchanged at 65 per cent.Article content“No bones about it, this is a solid report,” said Hencic. “However, this basically brings employment back to where it was in January, with an unemployment rate 0.1 percentage points higher.”Article contentHe said there continues to be a lot of noise in the

Canadian economic data, including the “disappointing” surprise contraction in first quarter GDP. But with April’s flash GDP estimate signalling a 0.4 per cent monthly gain and now May’s labour force report, he continues to expect a second quarter bounce-back in activity.Article contentHe added that the economy is nonetheless operating below capacity, providing a disinflationary offset to the energy price shock. With this backdrop he expects the Bank of Canada to stay on the sidelines next week and keep its policy rate at 2.25 per cent.Advertisement

1This advertisement has not loaded yet.Trending Ottawa’s budget watchdog predicts Bank of Canada will hike interest rate to 2.75% in 2027 Economy Canada’s unemployment rate drops to 6.6% as economy gains 88,000 jobs Economy Advertisement 2Story continues belowThis advertisement has not loaded yet, but your article continues below. Nasdaq 100 falls 3% as rotation out of tech stocks continues Investor U.S., Mexico, Canada to miss July CUSMA renewal date, ramping up trade tension Economy Canada Bonds Plunge After Country Adds Most Jobs Since 2024 PMN

Business Advertisement 2AdvertisementThis advertisement has not loaded yet, but your article continues below. Article content‘Difficult to have much confidence’: DesjardinsArticle contentRoyce Mendes, Desjardins Economics managing director and head of macro strategy, was a bit more cautious. He said the labour market showed signs of life in May with a strong rebound in job creation, which largely reverses the losses observed earlier in the year and the level of employment now just shy of its December 2025 peak.Article contentYields across the Government of Canada curve are

rising, led by the short end where traders are now pricing in between one and two rate hikes for the remainder of this year, he added.Article content“That said, given the volatility in the Labour Force Survey, it’s difficult to have much confidence in the signalling power of today’s reading,” said Mendes. “We continue to see downside risks for the Canadian economy both from fundamental weakness and trade negotiations.”Article content‘Welcome upside surprise but cautiously optimistic’: RBC EconomicsArticle contentRoyal Bank of Canada assistant chief economist Nathan Janzen

said May’s larger-than-expected increase in employment and drop in the unemployment rate is a welcome upside surprise, after the concerns around an unexpectedly soft GDP report for Q1 last week.Article contentArticle contentStill, the jump in employment in May was just the second increase in the last five months, he said, which still left the employment count slightly down year-to-date in 2026. He argued that a sharp slowing in population growth is distorting the historical comparison of employment growth, as around 26,000 workers retired per month

over the last year, and caps on temporary resident arrivals are reducing the supply of workers available from abroad.Article content“Looking ahead, the economic growth backdrop still faces headwinds,” Jensen said, pointing to the trade uncertainty ahead of negotiations to extend CUSMA and higher energy prices cutting into household purchasing power. “But we remain cautiously optimistic that per-person economic growth and labour market conditions will continue to gradually improve this year, with the unemployment rate edging broadly lower,” he said.Article content‘The economy isn’t booming, but it

isn’t falling apart, either’: BMOArticle contentBank of Montreal’s managing director for Canadian rates and macro strategist, Benjamin Reitzes, said the employment surge in May should silence the recession crowd, with the economy hanging in there despite the headwinds from trade and energy prices.Article contentArticle content“Just when you think Canada is crumbling amid a string of negative data points, things reverse,” Reitzes said. “We’ve seen this story a few times in the past year. The economy isn’t booming, but it isn’t falling apart, either.”Article contentThe May

jobs data is “an unambiguously strong report… Canada continues to hold in,” he said, and it should somewhat ease Bank of Canada worries about the economy after the negative GDP print. Still, he said the back-to-back negative GDPs, lower oil and tame core CPI point to a less hawkish (Bank of Canada decision) next week than in April…though the shift will be less material than if the May report was weak.Article content‘Strength increases chance of rate hikes: Capital EconomicsArticle contentCapital Economics senior North American economist

Ariane Curtis said the strength evident in Canada’s labour market increases the chance of rate hikes this year. She said the strong rebound in employment and the fall in the unemployment rate will provide some relief to the Bank of Canada that the economy is not in or on the verge of recession.Article content“While wage growth slowed, the strength in the labour market presents a risk to the view that the Bank of Canada will keep rates on hold this year,” she said. Article content‘Labour

market watchers can breathe a sigh of relief’: Indeed CanadaArticle contentIndeed Canada’s senior economist Brendon Bernard said May’s strong numbers are a good reminder of how a brewing trend in the labour force survey can reverse with just one data release. The slide in full-time job growth that started in February has reversed, and the 0.3-point drop in the unemployment rate almost brings it back to where it started the year.Article contentHowever, this isn’t particularly good news, he said, as the challenges facing Canadian job

seekers persist. The weak momentum that began the year was probably overstated, in part because the fourth quarter of 2025 was surprisingly strong, and now, he says, we’re back to baseline.Article content“Labour market watchers can breathe a sigh of relief. The employment situation showed a nice rebound in May, reversing a weak start to the year,” said Bernard. He noted that job postings on Indeed have been fairly steady over the past year, which suggests stable conditions in the broader labour market.Article contentArticle content‘Not the

backdrop to even consider raising rates’: Rosenberg ResearchArticle contentDavid Watt of Rosenberg Research & Associates Inc. said that beyond the optimistic headlines, the economy is barely scraping by.Article contentHe said that most of the increase in full-time jobs came in the youth category, which jumped by 98,700 — a very rare occurence, and notable given the many stories about the employment challenges facing young Canadian workers. Watt doesn’t think those challenges are gone, and, given the saw-tooth pattern of data from the May report, expects

the June jobs numbers might tell a different story.Article content“This is not the backdrop for a central bank to even consider raising rates,” he said. “Instead, it suggests keeping open the option that they might need to ease.”Article contentWatt added that he thinks the sell-off in the two-year bond that lifted its yield to 2.90 per cent will be unwound as folks take a closer look at the report.Article content• Email: dpaglinawan@postmedia.comArticle contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap

here to see other videos from our team.Article content Featured Local Savings

Canada jobs report, unemployment rate, 6.6%, 88,000 jobs, Bank of Canada, labour force survey, CUSMA, recession debate, economists