Canada's unemployment rate drops to 6.6% as economy gains 88,000 jobs
Tomas Kauer 
Canada’s unemployment rate fell to 6.6 per cent in May and the economy added 88,000 jobs , the first significant employment gain since November 2025.
The increase was driven by an addition of 154,000 full-time positions, according to data published by Statistics Canada on Friday. Part-time work declined, recording a loss of 66,000 positions.
The increase followed a net decline of 112,000 jobs over the first four months of the year, including a loss of 18,000 jobs in April that had nudged the unemployment rate up to 6.9 per cent.
Job gains were led by the construction industry, which added 27,000 jobs, as well as information, culture and recreation sector, which added 19,000 jobs. Transportation and warehousing saw gains of 19,000 jobs, while the accommodation and food services industry added 17,000 jobs.
May’s numbers defied economists’ expectations for a modest improvement at best.
“This is far beyond expectations,” said Sal Guatieri, a senior economist and director at Bank of Montreal Capital Markets. “We were expecting a very modest rebound in employment after three months of job losses out of the past four months.”
Guatieri said that while May’s job gains didn’t fully offset the losses to begin the year, they did make a “good dent” in the decline.
“It suggests that Canadian businesses might be adjusting to the tariffs and the recent spike in fuel costs,” he said. “It’s just one month of data, but it does suggest, tentatively, that Canadian businesses are making that adjustment, and it certainly suggests that Canada’s economy has a little more momentum and vitality than was previously thought.”
Claire Fan, a senior economist at the Royal Bank of Canada, called the results “a good surprise” but warned against reading too much into a single month’s data, noting that a slowdown in population growth may have distorted May’s numbers because it lowers the “breakeven employment” rate — the pace of job creation needed to prevent unemployment from rising. A RBC article in January said that, when taking into account that population growth is at a standstill and the aging population, Canada’s breakeven rate is slightly negative.
That said, she noted that the three-month average unemployment rate has been trending lower since the August and September 2025 peak, signs that the labour market is starting to stabilize.
The broad nature of the job growth was another positive sign. A lot of job growth over the past year has been driven by the health-care sector, and five industries outside of that sector posted higher job growth numbers in May.
“Again, we need to wait for June’s data to really confirm whether this is something that’s going to persist throughout the rest of the summer or the year, or if this is just some volatility in the data,” Fan noted.
She said RBC expect the unemployment rate to come down to around 6.3 per cent by the end of the year.
Both economists said the data will dampen concerns about a full-blown recession in Canada.
The C.D. Howe Institute’s Business Cycle Council, the authority on recessions in Canada, declared earlier Friday that it’s still too early to tell whether the economy is in a full-blown recession. Canada’s economic activity did not show pervasive decline and first-quarter decline was “of very low amplitude” compared to other recessions.
“We are seeing an upturn in activity now, as we saw with the May jobs report, and flash estimates for April’s GDP numbers did show a nice pop in economic activity. Our view is Canada will avoid a recession and will start to gain some momentum as the year progresses. We probably won’t see stronger activity, though, until the turn of the year, and then into next year,” Guatieri said.
The higher-than-expected unemployment numbers may not be enough to pull the Bank of Canada off the sidelines, however.
Andrew Grantham, executive director and senior economist at CIBC Capital Markets, said in an emailed note to clients that employment is still down year-to-date because of weakness earlier in the year and May’s unemployment rate is still higher than the recent low observed in January (6.5 per cent), which can still put downward pressure on inflation.
“Because of that we still think that the Bank of Canada will stay on hold this year, and further evidence of tightening within the labour market and an acceleration in core inflation would be needed for us to change that view,” the note read.
• Email: ptran@postmedia.com
