Key Takeaways
- The Canadian labor market lost 18,000 jobs last month, marking employment declines in three out of the past four months.
- The job market weakness highlights a fragile economy that’s already facing geopolitical and trade uncertainty, analysts say.
- The unemployment rate crept up to 6.9%, the highest in six months, raising doubt over whether the Bank of Canada will raise interest rates this year.
The Canadian economy lost 18,000 jobs in April, according to the latest Statistics Canada report, underscoring persistent labor market softness. Analysts say the trend points to broader economic weakness, making an interest rate hike from the Bank of Canada increasingly unlikely in the near term.
April’s decline marks a reversal from the 14,000 jobs gained in March, and it’s a sharp contrast with the FactSet estimate of 10,000 additions. Employment losses were driven primarily by losses in full-time positions.
Further cracks in the labor market emerged as the unemployment rate jumped to 6.9% in April from 6.7% the prior month, exceeding the 6.7% FactSet estimate. This is the highest jobless rate recorded in the past six months.
While the Bank of Canada has recently raised concerns about higher energy prices stemming from the war in the Middle East, analysts say a weakening labor market could dampen broader price pressures, reducing the need to raise interest rates.
The S&P/TSX Composite Index rose 0.60 percentage points to 34,055.13 following the latest employment report. The two-year government of Canada bond yield fell 0.08 percentage points to 2.84%, while the Canadian dollar fell 0.25% to C$1.36 against the USD, or 0.73 US cents.
The Bank has left its policy rate at 2.25% since December, after cutting it by a cumulative 1 percentage point last year. Policymakers are due to meet for the fourth time this year on June 10.
The following are excerpts from economist commentaries on the April jobs data.
A Rate Hike Remains Unlikely This Year
“The underlying tone in Canada’s job market remains quite sour so far in 2026, as the uptick in March jobs proved to be a false dawn. For the Bank of Canada, not sure we can be any more direct, but it’s incredibly tough to see the logic behind the market’s pricing of more than one rate hike later this year, when the economy is struggling mightily to take even one step forward. Even with the big slowdown in population growth, slack appears to be rebuilding in the job market, which should help keep a lid on any secondary inflation pressures from the oil shock.”
—Doug Porter, chief economist at BMO Economics
A Weaker Job Market Offsets Energy Inflation, Preventing a Rate Hike
“The Canadian labor market continued its weak start to 2026 in April, with a third decline in employment within the first four months of the year seeing the unemployment rate rise further. For the Bank of Canada, evidence that labor market slack is increasing rather than reducing should limit the ability of the oil price shock to spread into wider inflationary pressure. We continue to see the Bank of Canada holding interest rates at their current level throughout 2026.”
—Andrew Grantham, senior economist at CIBC Economics
Higher Unemployment Rate Eases Rate Hike Expectations
“The rise in the unemployment rate to a six-month high of 6.9% will help trim investors’ overly hawkish rate expectations, and it supports our view that with the labor market in a funk and a potential end to the Iran war in sight, rate hikes this year are still far from guaranteed.
“However, given we know that the Labor Force Survey is still understating the slowdown in population growth, we still have reason to believe the unemployment rate will trend downwards this year. Finally, a change in the composition of employment once again made average hourly earnings growth look concerningly high, at 4.5% y/y. Stripping out these effects, wage growth was a far modest 3.4% – in line with its recent average.”
—Bradley Saunders, North America economist at Capital Economics
The Soft Jobs Data Reinforces a Rate Hold Through Year-End
“Despite some regional weakness, the details of today’s release suggest the labor market is soft but not falling off a cliff. Given that policymakers need to balance this weakness with upside risks to inflation, we continue to expect the Bank of Canada to remain on hold for the remainder of this year. Canadian yields are lower and [the yield curve is] steepening following today’s Canadian employment figures.”
—Tiago Figueiredo, macro strategist at Desjardins Capital Markets
Jump in Jobless Rate Puts a Lid on a Policy Move This Year
“A modest drop in employment coupled with a sizable jump in the labor force drove up the unemployment rate two ticks this month. Although the monthly data reflects high variability, the persistently elevated unemployment rate reflects a job market that continues to struggle to absorb the labor supply. In the coming months, we expect the labor force increases to lose steam and help cap further rises in the unemployment rate.
“The economic outlook is far from rosy, and the ongoing slack in the labor market is reflective of an economy that is still struggling to gain traction. However, with the labor market still soft, firms have a more limited ability to pass on cost increases from the inflation shock to consumers. This is a key factor that underpins our view that if the sharp rise in oil prices begins to reverse in the coming weeks, the Bank of Canada will be able to stay on hold this year.”
—Andrew Hencic, director and senior economist at TD Economics
