Royal Bank of Canada (RBC) economist Claire Fan notes that February’s Canadian labour market data were weak, with employment falling and the unemployment rate rising to 6.7% as participation declined. She highlights that volatile monthly data are being distorted by slower population growth. Despite softer prints, Fan expects the macro backdrop to support hiring and sees the unemployment rate gradually moving lower later in 2026.
Soft data but improving outlook signaled
“February’s Canadian labour market report was soft. Employment fell 84,000, adding to the 25,000 losses in January. The unemployment rate rose to 6.7% after dropping to 6.5% in January, and the labour force participation rate declined again, to its lowest level outside the pandemic since 1997.”
“Monthly employment prints are volatile, and headline job growth remains partly distorted by sharply slower population and labour force growth, driven by retirements and government curbs on the share of non-permanent residents. In January and February combined, Canada’s population grew just 12,500—well below the 103,000 increase in 2025 over the same months. “
“In the past, we have warned how soft employment growth could persist and mask improvements in underlying hiring demand better reflected in the unemployment rate. In February, the unemployment rate ticked higher to 6.7% but remains below the Q4 2025 average of 6.8%. Total hours worked fell 1.1% in February, leaving Q1 on average flat versus the prior quarter. “
“Looking ahead, the macro environment—particularly a stabilizing trade backdrop thanks to preserved CUSMA exemptions, healthy domestic consumer spending trends, and continuous monetary and fiscal support—should all support a recovery in hiring demand.”
“We look through near-term volatility, and continue to expect gradual improvements to drive the unemployment rate lower through the remainder of the year.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/canada-gradual-labour-recovery-expected-rbc-202603131356