Canada turned out better than expected
took economists by surprise for the third month in a row, and most now seem to agree
interest rates have been reduced
for 2026.
Economy
in November the unemployment rate fell to 6.5 percent from 6.9 percent,
said on Friday. Economists expected 2,500 job losses and a rise in the unemployment rate to seven percent.
Here's what economists think
keep in mind
and for
.
“Adds hope”: Continuum Economics
“The data increases hopes… that the Canadian economy will be more resilient to tariffs than expected,” Dave Sloan, senior economist
Continuum Economics/4Cast Ltd.
The report said, citing annual gross domestic product (GDP) growth of 2.6 per cent in the third quarter, reported by Statistics Canada last week.
Three consecutive months of growth in September, October and November offset significant losses in July and August, although November's rise was driven entirely by a jump of 63,000 part-time workers, which he said was “not as impressive” as the number of full-time workers fell by 9,400.
However, the unemployment rate is at its lowest level since July 2024. Sloan said the unemployment rate may have peaked after hitting 7.1 percent in August and that the economy is picking up.
“Although the weak preliminary estimate for October GDP means this conclusion must be preliminary for now,” he said.
Either way, more jobs were created in November while the number of people looking for work fell, reversing the trend that has plagued the labor market over the past few years.
“A rate change at next week's (Bank of Canada) meeting already looked unlikely, and this data suggests we may have bottomed out for this easing cycle, although strong data should continue into early 2026 before the (Bank of Canada) begins to consider tightening,” Sloan said.
Head Scratching: CIBC
“Canadian employment data is often a source of confusion, but today's release was a real headache,” Andrew Grantham, economist at the company
“, the note says.
He said the labor market has seen mixed signals lately, including the loss of 56,000 positions, according to September payroll data, while the number of full-time jobs fell for the second month in a row, as did the unemployment rate and the number of people looking for work.
Grantham said he was pleased that the economy has added more jobs over the past six months, despite a significant downturn over the summer and a shrinking population and workforce.
“However, the composition was not as strong as the headline,” he said, as growth was concentrated in the part-time and younger worker sectors.
But what really surprised the economist was the fall in the unemployment rate, which he said was due to “a decline in the participation rate that continues to trend downward, which can only be explained by demographics.”
“We continue to expect that the Bank of Canada's rate-cutting cycle has ended, although we doubt that the recovery we are currently seeing will remain strong enough to lead to rate hikes before the end of 2026,” he said.
Unemployment rate 'staggering': BMO
“The real highlight of today's report is the massive four-tick drop in the unemployment rate to 6.5 percent,” Douglas Porter, the company's chief economist.
The report said this, adding that slowing population growth is one of the main factors contributing to the increase in unemployment.
“The report was not a complete show of strength” because the number of full-time jobs fell and so did industrial positions, he said.
However, total hours worked, excluding education, rose 1.4 percent year over year, and average hourly wages rose 3.6 percent over the same period.
“Coupled with inflation, which has gotten a little hotter of late, this (jobs report) quashes any lingering prospect of a near-term rate cut by the Bank of Canada,” Porter said.
He also said the chances of an interest rate cut in 2026 have diminished.
“Indeed, the market is now contemplating a rate hike in 2026,” he said.
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