‘Ends recession debate’: economists weigh in on the latest jobs report

Article content

‘Difficult to have much confidence’: Desjardins

Article content

Royce Mendes, Desjardins Economics managing director and head of macro strategy, was a bit more cautious. He said the labour market showed signs of life in May with a strong rebound in job creation, which largely reverses the losses observed earlier in the year and the level of employment now just shy of its December 2025 peak.

Article content

Yields across the Government of Canada curve are rising, led by the short end where traders are now pricing in between one and two rate hikes for the remainder of this year, he added.

Article content

“That said, given the volatility in the Labour Force Survey, it’s difficult to have much confidence in the signalling power of today’s reading,” said Mendes. “We continue to see downside risks for the Canadian economy both from fundamental weakness and trade negotiations.”

Article content

‘Welcome upside surprise but cautiously optimistic’: RBC Economics

Article content

Royal Bank of Canada assistant chief economist Nathan Janzen said May’s larger-than-expected increase in employment and drop in the unemployment rate is a welcome upside surprise, after the concerns around an unexpectedly soft GDP report for Q1 last week.

Article content

Article content

Still, the jump in employment in May was just the second increase in the last five months, he said, which still left the employment count slightly down year-to-date in 2026. He argued that a sharp slowing in population growth is distorting the historical comparison of employment growth, as around 26,000 workers retired per month over the last year, and caps on temporary resident arrivals are reducing the supply of workers available from abroad.

Article content

“Looking ahead, the economic growth backdrop still faces headwinds,” Jensen said, pointing to the trade uncertainty ahead of negotiations to extend CUSMA and higher energy prices cutting into household purchasing power. “But we remain cautiously optimistic that per-person economic growth and labour market conditions will continue to gradually improve this year, with the unemployment rate edging broadly lower,” he said.

Article content

‘The economy isn’t booming, but it isn’t falling apart, either’: BMO

Article content

Bank of Montreal’s managing director for Canadian rates and macro strategist, Benjamin Reitzes, said the employment surge in May should silence the recession crowd, with the economy hanging in there despite the headwinds from trade and energy prices.

Article content

Article content

“Just when you think Canada is crumbling amid a string of negative data points, things reverse,” Reitzes said. “We’ve seen this story a few times in the past year. The economy isn’t booming, but it isn’t falling apart, either.”

Article content

The May jobs data is “an unambiguously strong report… Canada continues to hold in,” he said, and it should somewhat ease Bank of Canada worries about the economy after the negative GDP print. Still, he said the back-to-back negative GDPs, lower oil and tame core CPI point to a less hawkish (Bank of Canada decision) next week than in April…though the shift will be less material than if the May report was weak.

Article content

‘Strength increases chance of rate hikes: Capital Economics

Article content

Capital Economics senior North American economist Ariane Curtis said the strength evident in Canada’s labour market increases the chance of rate hikes this year. She said the strong rebound in employment and the fall in the unemployment rate will provide some relief to the Bank of Canada that the economy is not in or on the verge of recession.

Article content

“While wage growth slowed, the strength in the labour market presents a risk to the view that the Bank of Canada will keep rates on hold this year,” she said.