It is green across the board for May's labour market

After months of labour market weakness, Canada added 88,000 jobs in May, clawing back nearly 80% of the employment lost over the first four months of the year. The gains were broad based: youth unemployment surged by 22,000, driving the youth unemployment rate down nearly a full percentage point to 13.4%, while core-aged workers also posted solid gains. Critically, virtually all of the gain was in full-time work, spanning both goods-producing and services sector.

However, this month’s positive uptick in the labour market, with -0.1% growth in GDP in the backdrop, once again puts the Bank in a tricky balancing act. Without any clear signals, we expect the Bank to stay on the sidelines and hold its policy rate for the fifth consecutive time.

Key Takeaways

• Employment Levels: In May, Canada experienced its first month of most significant employment gain since the beginning of 2026, added over 88,000 new workers to the economy, clawing back nearly 80% of the net employment lost since January 2026. Employment rate rose 0.2 percentage points month-over-month to 60.7% in May — the first increase since November 2025.
• Unemployment and Participation Rates: Though participation rate remained unchanged at 65%, the unemployment rate fell 0.3 percentage points month-over-month to 6.6%, retreating from April’s recent high of 6.9%. Importantly, the decline was driven by real, absolute gains in employment rather than a shrinking labour force.
• Demographics and Job Types: After months of weak hiring, May recorded its strongest full-time employment gain since November 2025, adding 154,000 full-time jobs, fully offsetting the 156,000 full-time positions lost between January and April. Part-time employment declined by 66,000 in the same month. Both youth and core-aged workers shared the gains, with unemployment rates falling 0.9 and 0.4 percentage points to 13.4% and 5.6% respectively, month-over-month. Youth accounted for roughly 25% of total employment gains, with the remainder split between core-aged men and women, with marginally more women added to the employed pool.
• Sectoral Breakdown: Employment gains were broad-based, spanning both goods-producing and services industries. Construction led all sectors with +27,000 jobs, followed by information, culture and recreation (+19,000), transportation and warehousing (+19,000), and accommodation and food services (+17,000). Manufacturing also added 15,000 jobs, though the sector remains under pressure from U.S. tariff uncertainty. The only significant drag came from wholesale and retail trade, which shed 35,000 jobs.
• Provincial Trends: Provincial gains were also broad-based, with 7 out of 10 provinces recording a decline or no change in their unemployment rates. Ontario led all provinces, adding 42,000 jobs with its unemployment rate falling to 7.0%, lowest since September 2024. Alberta and Quebec rounded out the gains at +14,000 and +13,000 respectively, while Saskatchewan was the only province to record a notable employment decline (-6,100).

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