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Canada's Labor Market Shows Signs of Life in May, With A Strong Rebound in Job Creation, Says Desjardins

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In contrast to expectations for a "modest" 10,000 increase, Canadian employment rose 88,000 during the month, said Desjardins after the Friday Labour Force Survey (LFS).

Strength was broad-based across industries and was all in full-time work, noted the bank. That saw the unemployment rate drop to 6.6% from 6.9% in April.

The rebound largely reverses the job losses observed earlier in the year, with the level of employment now just shy of its December 2025 peak, stated Desjardins.

Yields across the Government of Canada (GoC) bond 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, added the bank.

That said, given the volatility in the LFS, it's difficult to have much confidence in the signaling power of Friday's reading, according to Desjardins.

The bank continues to see downside risks for the Canadian economy, both from fundamental weakness and trade negotiations.

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