Key Takeaways
- November jobs data showed a third consecutive month of consensus-beating job gains for the Canadian labor market.
- Despite pockets of labor softness, analysts broadly predict the Bank of Canada will end its cycle of interest rate cuts.
- Sustained hiring strength, coupled with a sharp drop in the jobless rate, is prompting the market to price in an interest rate hike in 2026.
The November jobs report showed that the Canadian economy added jobs at a healthy pace for the third month in a row. The stronger-than-expected job gains led markets to price in an interest rate hike from the Bank of Canada in 2026, though most analysts believe the bank will hold rates steady at its upcoming meeting on Wednesday, Dec. 10.
The economy added 54,000 jobs in November, following 66,600 additions in October, significantly outstripping the modest FactSet estimate for 5,000 gains. Even as most of the gains came from part-time work, Canada’s unemployment rate fell to 6.5%, the lowest level in 16 months and well below the 7.0% that economists expected.
The sustained labor market strength validates the Bank of Canada’s signal last meeting that its rate-cutting cycle may be over. Even as the market reeled from widespread tariff hits that stifled business sentiment, cumulative job gains for the past three months reached 181,000.
According to Statistics Canada’s November Labor Force Survey, the strength was driven largely by 52,000 jobs being added in the private sector, while there was little change in public jobs and self-employed workers—a pattern similar to the month before.
The recent strength in the labor market is another sign of Canada’s economic revival, coming on the back of surprising strength in GDP numbers while inflation has hovered a touch over the central bank’s 2% target. The data provides policymakers at the Bank with a breather and an incentive to move back to the sidelines after cutting interest rates at its last two meetings, bringing the policy rate to 2.25%, the bottom of its neutral range. Policymakers indicated at the Bank’s October meeting that this rate was “at about the right level,” and that further cuts would do little to contain the fallout from the trade conflict with the United States.
The consensus-beating November jobs report represents the last piece of significant data before the Bank’s Governing Council delivers its final rate decision for the year on Dec. 10.
The S&P/TSX Composite Index remained unchanged at 31,491.62. Canadian bonds edged down across the curve, with the two-year government of Canada bond yields dipping 12 basis points to 2.58%, while the Canadian dollar jumped 0.51% to 1.38883 against the US dollar, or 0.72024 US cents.
Reflecting a sharp sentiment shift, markets are now pricing in nearly 50% odds of a 25-basis-point raise in interest rates by the third quarter of 2026.
Below are excerpts from economist commentaries on the November jobs report.
November Jobs Data Squashes Hopes for Cuts in 2026
“This solid jobs report follows a series of better-than-expected results on the Canadian economy in recent weeks, including the upside surprise on Q3 GDP and the earlier robust job gains. Coupled with inflation that has been running a tad hot of late, this quashes any lingering prospect of a near-term Bank of Canada rate cut. There really wasn’t much doubt that the Bank was on hold next week, but the series of good employment gains, and—maybe more importantly—the sudden pullback in the unemployment rate seriously reduces the odds of any further cuts in 2026.
“Indeed, the market is now dabbling with the possibility of rate hikes in 2026; we believe that is truly premature, particularly with the dark cloud of USMCA uncertainty rolling straight back onto the landscape in recent days. But the fact that the jobless rate has dropped all the way back to levels prevailing in the summer of 2024 is a very nice way to end off 2025.”
—Doug Porter, chief economist at BMO Economics
The Bank of Canada’s Rate-Cutting Cycle is Over
“While we doubt that the labor market is quite as strong as today’s headline data suggests (given the somewhat concentrated job gains and decline in participation that flattered the unemployment rate), today’s release is still supportive of our assumption that the Bank of Canada’s rate cutting cycle has ended.”
—Andrew Grantham, senior economist at CIBC Economics
Blockbuster Employment Gain Takes Rate Cuts Off the Table
“It now seems very unlikely that the Bank of Canada will need to provide additional policy support to the economy next year, as we have been forecasting.
“Although the quality of jobs added last month can be questioned, this does not take the shine off what can only be described as another strong Labor Force Survey. To cap it off, the unemployment rate fell sharply by 0.4%-points to 6.5%, its lowest level since July last year. Money markets are already adjusting, now pricing in 15 basis points of hikes for next year, having previously expected policy to remain unchanged.”
—Thomas Ryan, North America economist at Capital Economics
Markets Are Now Pricing in a Hike Next year
“Three consecutive months of relatively positive labor market releases should keep central bankers comfortably on the sidelines. That said, we don’t appear to be out of the woods yet. While the market focuses on the labor force survey as the more timely measure of Canada’s labor market, the payrolls data for September showed a fairly weak reading. As such, it’s probably still too early to tell if this is truly a sign of recovery for the economy.
“Nonetheless, this reinforces our revised call that the Bank of Canada moves back to the sidelines next week, leaving rates unchanged after easing in September and October. Yields are notably higher following today’s numbers with the market now almost pricing a full hike by the end of next year.”
—Tiago Figueiredo, macro strategist at Desjardins Capital Markets
Bank of Canada to Hold Rates Through 2026
“This far exceeds our expectation for a moderate job loss and the consensus forecast for a small decline in employment. However, we’re skeptical about the recent pickup in LFS employment, and whether it reflects the true state of Canada’s labor market. StatCan’s less timely but more well-grounded Survey of Employment, Payrolls, and Hours (SEPH) released last week showed a 58,000 m/m job loss in September compared to the LFS’s 60,000 m/m gain, and the SEPH measures year-over-year employment growth of just 0.1% compared to 1.1% in the LFS.
“We don’t think the strong pace of hiring in recent months will be sustained and expect layoffs will build in the near term as trade policy uncertainty and US tariffs weigh on firms amid weak domestic demand. However, a shrinking population will limit the rise in the unemployment rate. So, today’s labor market data will not likely sway the Bank of Canada, and we continue to expect it will hold rates steady on December 10 and through 2026.”
—Tony Stillo, head of Canada economics at Oxford Economics
The Unemployment Rate Is Still Elevated
“Sure, the details suggest that part-time work is leading the charge on employment these past few months, but it’s impossible to ignore that the jobless rate has fallen from 7.1% in September to 6.5% as of last month. The takeaway has to be that the Canadian labor market is in better shape than most had thought. That said, this situation can’t be characterized as ‘good’. The unemployment rate is still elevated, and job gains have been concentrated in part-time work. So, while this is an improvement, there is still room for recovery.
“The Bank of Canada’s next decision is due next week, and the past few employment reports have painted an encouraging picture of where the economy stands. However, there is still slack in the labor market and the trade picture heading into next year remains highly muddled. Our view is with the inflation rate expected to continue moderating, the Bank will remain on the sidelines next week and continue to look for signs that a sustained recovery is in the works.”
—Andrew Hencic, director and senior economist at TD Bank
