October Labour Market Snapshot And What It Means for Borrowers
Canada’s job market showed surprising strength in October, adding 66,600 jobs—bringing the two-month total to +127,000 and offsetting summer losses. The unemployment rate dipped to 6.9% from 7.1%, signaling resilience despite economic uncertainty.
Key highlights:
- Employment growth was strongest in retail, transportation, recreation, and utilities. Construction saw a modest decline.
- Ontario led gains with +55,000 new jobs; Newfoundland also saw growth, while Nova Scotia and Manitoba declined.
- Wages rose 3.5% year-over-year, now averaging $37.06/hour.
- Part-time jobs drove October’s increase, while full-time growth dominated September. Both are up year-over-year.
- Private sector hiring rebounded, while public and self-employed numbers held steady.
- Labour disputes—notably in Alberta’s education sector—led to a slight dip in total hours worked.
With the Bank of Canada’s overnight rate holding at 2.25%, this stronger-than-expected report likely takes the possibility of a rate cut in December off the table. Solid job growth and rising wages suggest the economy is still running warm, which may keep borrowing costs steady for now.
Trade Tensions and Fiscal Policy: What to Watch
Despite October’s strong jobs report, Canada’s economy remains exposed to uncertainty around the U.S. stance on the free trade agreement, which is set for renegotiation by July 2026. Bank of Canada Governor Tiff Macklem has indicated that fiscal stimulus—not rate cuts—would be the preferred response to any tariff-related slowdown. However, based on the 2025 federal budget announcements, any meaningful impact from fiscal measures may take time to materialize.
Meanwhile, the unemployment rate fell to 6.9% in October, down from 7.1% in August and September—the highest level since 2016 (excluding pandemic years). Encouragingly, nearly 1 in 5 unemployed Canadians in September found work in October. That’s an improvement from last year’s 16.5% job-finding rate, though still below the 2017–2019 average of 24.6%.
Taken together, this data reinforces the view that a December rate cut is unlikely. The Bank of Canada appears focused on maintaining stability while fiscal tools take shape
Looking Ahead: What to Expect from the Bank of Canada
The Bank of Canada has signaled that its priority remains fighting inflation, leaving broader economic support—like closing the output gap—to fiscal policy. But with major capital spending projects slow to roll out, it’s likely the Bank will recognize by early next year that fiscal stimulus alone won’t be enough.
As a result, we expect the Bank to begin easing rates in 2026, with the overnight rate potentially reaching 2.0% in the first half of the year
