Canada’s labour market posted a much stronger-than-expected performance in May, adding 87,800 jobs and pushing the unemployment rate down to 6.6 per cent. The report suggests economic activity may have stabilized after a weak start to the year, though economists caution against reading too much into a single month of volatile data.
BNN Bloomberg spoke with Veronica Clark, economist at Citi, who said the employment gains largely reverse earlier weakness rather than signal a major turning point, and noted that broader indicators still point to a labour market operating below pre-pandemic strength.
Key Takeaways
- Canada added 87,800 jobs in May, far exceeding expectations and lowering the unemployment rate to 6.6 per cent.
- Much of the improvement merely returns employment levels to where they stood at the start of the year after several weak months.
- Job gains were broad-based across goods-producing and service sectors, with strength in areas including food services and accommodation.
- Youth unemployment improved, but economists caution it is too early to conclude hiring conditions for young workers have sustainably recovered.
- Despite the strong report, the unemployment rate remains elevated relative to pre-pandemic levels, supporting expectations for additional Bank of Canada rate cuts.
Read the full transcript below:
LINDSAY: Canada added almost 90,000 jobs in May, blowing past economists’ expectations and bringing the jobless rate down to 6.6%. Still, May’s job growth only partially reverses the loss of 112,000 jobs in the first four months of the year. So, let’s get more from Veronica Clark, economist at Citi, who joins us this morning. Good morning. Thanks so much for joining us.
VERONICA: Yeah, good morning. Thanks for having me.
LINDSAY: What’s behind the 88,000 new jobs that we saw in May?
VERONICA: Yeah, I think that maybe the most important thing to remember is that this is just incredibly volatile data. So, yeah, you don’t want to read so much into any one month, but yeah, this was much stronger than we expected. We did see it in full-time employment, which is usually a better indicator of the more stable employment, which is a good sign. But full-time employment and total employment, both of those in level terms, are just back to where we were at the beginning of the year. We had a number of much weaker months. The unemployment rate is still in this six-and-a-half to seven per cent range that it’s been in for a while, so I would really caution reading too much into just this one month of data.
LINDSAY: I take your point on that, but we’ll still look into it as well and just see where we got the jobs numbers from this month. Which sectors saw the most strength?
VERONICA: Yeah, it was relatively broad-based. It was both goods and services, so maybe there is some recovery in goods-related sectors. But we did see some strength in sectors like food services and accommodation, of course. At the same time, we also had a really strong employment number in the U.S. I do wonder if maybe there’s some early summer hiring. Both countries are experiencing World Cup-related demand, maybe something like that that could support sectors like food services and accommodation. So, we’ll see how the data evolve into the summer, but maybe there’s some early summer hiring going on.
LINDSAY: Yeah, and then on the flip side, where do we see the most weakness in terms of sectors?
VERONICA: Yeah, I mean, definitely some of the more trade-exposed sectors. You’re getting some recovery, but they’re still a ways off from where they were before all the trade uncertainty and developments. So manufacturing, that’s softer than probably you want it to be, but we do see more recovery there as those trade uncertainties maybe do start to fade.
LINDSAY: When it comes to regions of Canada, it’s always interesting to break that down as well. Which provinces or territories saw the most gains in the month of May?
VERONICA: Yeah, Ontario, of course, a large province that’s had a couple of months now of employment gains. British Columbia did as well. Again, maybe the strength in regions like Ontario is reflecting some kind of recovery from trade developments. But again, it’s just a couple of months that we’ve seen gains there, so you do want to take it with some caution.
LINDSAY: Yeah, as you say, this could be some hiring for the World Cup, especially if you’re saying we saw most of those gains in Ontario and B.C., which is where they’re going to be hosted. Okay, so this report also did have some good news for young people in it, though, with the jobless rate falling almost a full percentage point. Is that what you’re saying maybe we shouldn’t be reading into, or what did we see there?
VERONICA: Yeah, I would be a little bit cautious on that still. For now, it is a positive sign for hiring if youth unemployment is coming down. That’s a cohort that has really struggled to find work. This has been a very low-hiring, low-firing environment for a while, but that really does weigh on new entrants to the labour force who are looking for jobs for the first time. But yeah, I would caution that this is May data. It’s early in the summer. As we get more students after the end of the school year starting to look for work, there has not necessarily been a broad-based recovery in hiring demand. I watch data like Indeed.com job postings, so new postings for work, and those have started to come down at the end of May. So, I’m still a bit cautious that we’ll see a sustained recovery there, but it would be a positive sign for new hiring if we did.
LINDSAY: I want to talk about the unemployment rate as well and how these gains in jobs maybe impacted the unemployment rate. What have you seen there?
VERONICA: Yeah, I mean, certainly they’re related, of course. We added a lot of jobs and the unemployment rate came down. We’ve been stuck in this six-and-a-half to seven per cent range for the unemployment rate for a while. We got a little bit above that range at the end of last summer or so, but that kind of range is higher than what we saw pre-pandemic. It is telling us that the labour market is looser than pre-pandemic. You would probably want to see a more sustained pickup in hiring to get that unemployment rate lower. The way the Bank of Canada would be looking at it, that is still an unemployment rate that is correlated with a negative output gap. We’re still running activity below potential. But yeah, we’ve just been stuck there. If we saw more months like this month, of course, more job gains like this month, I would expect that rate to come down, but it does seem pretty stable in this range that it’s been in.
LINDSAY: We’ve seen GDP data showing the Canadian economy contracted slightly in the last two quarters. Despite that, many economists have yet to say we’re actually in a recession. I wonder, how do these job numbers that we’re seeing today kind of play into that debate, do you think?
VERONICA: Yeah, if anything, it does make you a bit more comfortable with the state of the economy after Q1. We had that Q1 contraction in GDP. It looks like Q2 activity will rebound, and we had the flash estimate for April GDP showing 0.4 per cent growth. That’s a pretty strong month. Maybe May will also be somewhat strong, so we should expect some recovery in growth as we get into Q2. But it is tricky again because we’ve just seen such extreme volatility in the growth figures and the employment data. So, you do have to average through many months and many quarters, and it still seems like the labour market is weaker than you want it to be. The unemployment rate is stuck in that six-and-a-half to seven per cent range, and growth is not quite as strong as potential, not quite as strong as the Bank of Canada would maybe want it to be.
LINDSAY: Okay, we’re going to have to leave it there. Veronica Clark, economist at Citi, always great to have you on to break down the numbers. Thank you.
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This BNN Bloomberg summary and transcript of the June 5, 2026 interview with Veronica Clark are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
