Surprise. The Canadian economy created a stunning 83,100 jobs in June, far more than the consensus expectation of 8,000 in an Econoday survey of forecasters. The economy hadn't added that many jobs since December 2024. The unemployment rate ticked down to 6.9 percent while expectations had centered on an increase to 7.1 percent from 7.0 percent. This was the first unemployment rate decline since January. The participation rate edged up to 65.4 percent from 65.3 percent.

A 69,500 gain in part-time employment led the overall increase in June, although full-time was also up 13,500. Employment was driven by the private sector, which added 46,600 jobs, nearly twice as much as the public sector. Services increased 73,100 while goods-producing industries were up 10,100.

Layoffs rates are holding steady.

For those with a job, wage growth slowed to 3.2 percent year-over-year, down from an average hourly rate increase of 3.4 percent in May (unadjusted). Hours worked increased 0.5 percent on the month and 1.6 percent year-over-year.

Does this mean any Bank of Canada rate cut is off the table? Probably not, given ongoing trade-related uncertainty. The minutes from the June policy meeting showed"some diversity of views for the most likely path ahead" reflecting the diverging forces at play: on the one hand tariffs and uncertainty threaten growth and on the other hand they are a risk for inflation.

On the tariff front, uncertainty is still strong. Recently, U.S. President Donad Trump ended trade talks due to a digital tax that was about to come into effect. Canada responded by rescinding the digital tax that would have impacted large tech companies like Google and Amazon. This move by Prime Minister Mark Carney, while criticized internally, revived hopes for a bilateral agreement in July. However, Trump is now threatening 35 percent tariffs on Canadian goods starting August 1, reminding of the political volatility. The Canadian economy proved more resilient than expected in the first quarter, but the central bank expects a significant weakening in the second quarter. GDP growth contracted 0.1 percent in April and the advance estimate for May points to another contraction. On the inflation front, there was some easing in May, which, combined with the wage growth slowdown, provide some leeway to the central bank. But, core inflation remains quite a bit higher than the central bank's target for comfort and likely in the firmness zone.

In addition to ongoing uncertainty, today's employment data showed some vulnerability given that job gains were concentrated in part-time and that long-term unemployment increased.

Overall, the jobs report gives more reason to the central bank to wait and see, especially since one of the most at-risk sectors manufacturing saw a 10,500 gain in employment, which, together with a 7,600 increase in construction, drove gains in goods-producing industries in June.

Most of the June increase came from services, with a 33,600 surge in wholesale and retail trade and a 16,700 growth in health care and social assistance. Professional, scientific and technical services were up 11,900. Employment decreased in only two services sectors: transportation and warehousing (-3,400) and other services excluding public administration (-8,500).

Employment expected up a modest 8K with the jobless rate up to 7.1 percent in June from 7.0 percent in May. Canada’s job market continues to struggle under the weight of tariffs.

The Labour Force Survey is a key economic indicator giving an overall picture of employment and unemployment. Employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The unemployment rate measures the number of unemployed as a percentage of the labor force.

As in the U.S., this report is used as an indicator of the health of the domestic economy. Employment trends and break-downs by industry groups highlight the strength in job creation and the implications for future sectoral activity. The unemployment rate is used as an indicator of tightness in labor markets and can foreshadow a future increase in wages. Labor force data provide investors with the earliest signs of industry performance. While other data are produced with a month or two delay, these data are available only a week to 10 days after the end of the latest month. Reactions can be dramatic - especially when the result is unanticipated.

The information in the report is invaluable for investors. By looking at employment trends in the various sectors, investors can take more strategic control of their portfolio. If employment in certain industries is growing, there could be investment opportunities in the firms within that industry.

The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.

The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.