July Employment: Turning a Corner?

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M

Update

August 7, 2026 02:31 PM GMT

Morgan Stanley & Co. LLC

Canada Economics | North America

Arunima Sinha

Global Economist

July Employment: Turning a

Corner?

Mayank Phadke, CFA

Economist

Bottom Line: Canada added 75k jobs in July (Prior: +18k), the third straight solid

print, and the unemployment rate fell for a third consecutive month to 6.4% — a

two-year low. Unlike the spring's near-flat readings, this was a genuine step up: the

gain is statistically real, participation rose, and, for once, the unemployment rate fell

as the labour force expanded rather than shrank — a firmer, more demand-led

improvement with strength across sectors. We read this month's data as indications

that the tail risks for the labor market appear to be reducing, while core inflation

and wage growth remains contained. Coupled with risks around upcoming Section

338 tariffs, we believe this print is likely to keep the Bank of Canada comfortably on

hold at 2.25%.

Employment: a firmer print, broadly composed

Employment rose 75k (+0.4%) in July, up from +18k in June, with the month's

gain split roughly evenly between full-time (+39k) and part-time (+37k). The

three-month picture is stronger and higher-quality than the single month:

employment is up 181k since April, and all of that net gain is full-time (+193k), with

part-time down slightly over the same window. On a year-over-year basis

employment is up 196k (+0.9%). The employment rate rose 0.1pp to 60.9% and is

now up 0.2pp from a year ago.

Exhibit 1:

The unemployment rate hit

a 2-year low, and participation rose...

7.0%

...as the economy added

75k jobs with strength across sectors

UR: 6.42% 67.0%

(-8bp)

7.5%

Exhibit 2:

150

Canada: Employment Change (Monthly, 1000s)

100

6.5%

66.0%

50

65.0%

-50

6.0%

0

5.5%

5.0%

LFPR: 65.12%

(+15bp)

4.5%

4.0%

Mar/23

-100

95% Confidence Interval

64.0%

Sep/23

Mar/24

Sep/24

Unemployment Rate (LHS)

Mar/25

Sep/25

Mar/26

Change in Monthly Employment

-150

Participation Rate (RHS)

Source: Statistics Canada, Morgan Stanley Research

Industry: Broad and Consistent

The gain was services-led and, over the quarter, broad. Services-producing

…