The Canadian economy added a surprisingly large number of jobs in July, and the unemployment rate fell to a two-year low. The increase in Canadian jobs is in sharp contrast to the United States, which unexpectedly shed positions last month.
Canada added a net 75,100 jobs in July, outpacing economists’ expectations of 20,000 positions, Statistics Canada reported on Friday. The unemployment rate fell to 6.4 per cent from 6.5 per cent in June.
In the U.S., employment decreased by a net 23,000 positions in July, a far cry from the additional 80,000 jobs that were expected by economists.
Labour outcomes in the two countries have diverged of late. Where overall U.S. employment appears to have stalled, hiring in Canada has flourished over the late spring and early summer, part of a recent run of strong data that shows the Canadian economy is snapping out of a prolonged slump.
“Despite all the see-sawing in the headlines, I think the main story here is the economy has come back on track,” Douglas Porter, chief economist at BMO Capital Markets, said in an interview.
Canada’s employment gains in July were broad-based and split between full-time and part-time work, with the wholesale and retail trade sector leading the growth.
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Workers sort and bag cereal at the Farm Girl warehouse in Mississauga, Ont.Galit Rodan/The Globe and Mail
Finance, insurance and real estate, along with professional and technical services – which are typically high-wage sectors – contributed to around 35,000 jobs in July. Those increases are an encouraging sign, said Andrew Grantham, senior economist at CIBC Capital Markets.
Gains driven by the private sector and among self-employed workers were partially offset by a loss of 27,000 jobs in the public sector – the second consecutive month of decline. Employment in the public sector has fallen by 0.4 per cent since July, 2025, the first year-over-year decline since 2020.
Ontario experienced the largest job increase among the provinces, with 52,000 jobs created in July. Those are significant gains considering the province has been hit hard by tariffs, trade uncertainty and the rise in energy prices.
“Even over the past year, Ontario has seen above-average job growth. That’s probably the single biggest surprise here,” Mr. Porter said.
The Canadian economy is on track to post annualized growth of more than 3 per cent in the second quarter, based on early data. This would amount to a notable rebound for the economy, which has effectively stagnated since U.S. President Donald Trump’s return to office and his ratcheting up of trade protectionism, including steep tariffs on key Canadian industries.
“Given all the trade uncertainty we’ve been dealing with, and the run-up in gasoline prices as a result of the conflict with Iran, it’s not a bad place to be,” Mr. Porter said.
Economists play down BoC rate hike risks after surprisingly strong jobs data
The U.S. employment gains in July were seen in the private sector, which added a mild 30,000 jobs, offset by a 53,000-job decline in government employment.
In addition to the July results, the U.S. Bureau of Labor Statistics revised employment numbers down in May and June by 103,000.
Mr. Porter cautioned against comparing Friday’s jobs reports directly, as the U.S. relies on business payrolls to estimate the number of jobs created. That method excludes self-employed individuals and means that someone with two jobs could be counted twice. The StatsCan Labour Force Survey instead estimates the number of employed people by surveying households.
But a stark contrast remains as Canadian employment is up almost 1 per cent over the past year, while U.S. employment is up just 0.2 per cent, based on payroll data.
Mr. Porter said that in both countries, there’s a slowdown in the number of people looking for work, meaning it only takes a little job growth in either economy for the unemployment rate to fall.
Indeed, the U.S. unemployment rate fell to 4.1 per cent in July from 4.2 per cent in June as more people left the labour market, bringing down the unemployment rate as fewer people looked for work.
The Canadian dollar jumped to about 72 U.S. cents on Friday, its highest mark in about two months. U.S. Treasury yields fell as investors scaled back expectations of rate hikes. As of Friday afternoon, investors were pricing in a roughly 40-per-cent chance that the Federal Reserve raises interest rates by a quarter-percentage point at its Sept. 16 meeting, down from 60 per cent on Thursday, according to Bloomberg data.
“What we’re seeing in the U.S. at the moment is that the economy there does seem to be slowing down. What the Fed will need to see if they are going to sit on the sidelines – as we expect – is that some of that slowing within the economy will also translate to a slowing in core measures of inflation,” Mr. Grantham said.
The swaps market is pricing in one rate hike from the Bank of Canada by January, and potentially a second hike by next spring or summer. That said, investors have generally taken a more hawkish view of the BoC’s rate path in recent months, while economists on Bay Street have expected the central bank to hold steady, given the trade uncertainty that has tempered growth.
Mr. Grantham said that if the Canadian economy’s momentum continues, the Bank of Canada may need to raise rates around the middle of next year.
“But certainly, we don’t need to see anything in the near term,” he said.