‘Things are getting a little bit more competitive as a whole’ says economist of StatCan's latest employment data
Canada's labour market continued its recovery in July 2026, with Statistics Canada's Labour Force Survey (LFS) showing 75,000 new jobs added and the unemployment rate falling to 6.4 per cent – its lowest point since July 2024. The headline numbers point to genuine improvement, but HR and business leaders should read the data in context as they build workforce strategies for the second half of the year, according to Andrew Hencic, Director and Senior Economist at TD Economics in Toronto.
The July LFS, released Friday, showed Canada's employment level rising 0.4 per cent nationally, with the overall employment rate edging up to 60.9 per cent. The unemployment rate fell for a third consecutive month and is now down 0.5 percentage points since April. Ontario drove the largest provincial gain, adding 52,000 jobs and bringing its unemployment rate to 6.8 per cent – down sharply from a recent high of 7.9 per cent in December 2025. British Columbia gained 18,000 jobs and Manitoba 5,900.
The July numbers are encouraging, says Hencic. "We had a solid employment gain, the unemployment rate fell – and this is despite the labour force growing, which is to say that the economy is absorbing slack," he says. "It's a clear improvement, and it's building on a couple of months of nice momentum that we've seen."
Hencic points to strong second-quarter gross domestic product (GDP) growth as a tailwind, noting the data suggests "the second quarter of 2026 is going to be very strong." But he notes that some of that bounce-back reflects the smoothing of first-quarter disruptions, including weather-related impacts. TD Economics' June forecast called for annualized Q3 and Q4 growth of 1.9 and 1.7 per cent respectively – though Hencic believes Q2 is likely to come in stronger, which may temper those numbers slightly.
The Bank of Canada, weighing tariff risks against upward energy price pressures, has held rates steady. "We think the balance of risk is such that [the rates] stay on hold as the economy gradually continues to recover," says Hencic. “The unemployment rate is at its lowest level in quite some time, but it's still at 6.4 per cent, which is indicative of an economy, a labour market that still has slack in it.”
Private sector rebound signals talent competition ahead
The July data revealed a clear divergence between public and private sector employment. Public sector employment declined by 27,000 (-0.6 per cent), while private sector jobs grew by 58,000 (+0.4 per cent) and self-employment rose by 44,000 (+1.6 per cent). Since April, private sector employment is up 146,000 and self-employment by 73,000, according to StatCan.
"The return of dynamism in the private sector is encouraging," says Hencic, noting that former public-sector employees are unlikely to leave the labour force entirely. "They're going to be looking for work – if not in the public sector, then in the private sector. That shifting composition may indicate that as well."
Hencic believes that the quality of those private sector gains matters. "If we can start to see those job gains continue to pick up in the private sector, that would be encouraging,” he says. “We would hope that's in high-productivity industries and helps raise livelihoods across the board."
The shift, along with the falling unemployment rate, has direct implications for talent leaders. With Canadian employers feeling positive about hiring in the second half of 2026 and competition for skilled workers intensifying, organizations need structured approaches to capturing workers transitioning from the public sector, as "things are getting a little bit more competitive as a whole," says Hencic.
Wage data requires a closer look
Average hourly wages among employees rose 2.8 per cent year-over-year to $37.17 in July 2026, according to StatCan – a slowdown from 3.3 per cent growth in June. For business leaders reviewing their compensation strategy, Hencic suggests a careful reading of that figure.
"I would urge a little bit of caution on that wage number… it's not adjusted for the composition of the workforce,” he says. “If you have people moving from high-wage industries to low-wage industries, the average wage is going to decline. It's not necessarily the case that wage growth has slowed down in every profession."
For a more granular picture, Hencic points to StatCan's Survey of Employment, Payrolls and Hours (SEPH), which publishes a fixed weighted index of average hourly earnings by industry. Unlike the LFS wage measure, the SEPH controls for workforce composition shifts. "Those are the ones you want to look at," he says.
The distinction has practical implications for compensation planning. An organization operating in finance, insurance and real estate – a sector that added 18,000 jobs in July – may face meaningfully different wage pressure than one in wholesale and retail trade, where the largest employment gain of 21,000 was recorded, despite that industry tracking lower on a year-over-year basis.
Demographic shifts and the participation outlook
Core-aged women aged 25 to 54 drove a significant share of July's gains. Their employment rose by 33,000, with their employment rate reaching 81.2 per cent – now above the pre-pandemic average of 79.1 per cent recorded from 2017 to 2019, according to StatCan. Their unemployment rate fell 0.3 percentage points to 5.2 per cent.
The labour force participation rate for the core working-age cohort for women and men overall has risen steadily since March and is nearing record highs, says Hencic.
Youth employment remained elevated. The unemployment rate for Canadians aged 15 to 24 was 12.6 per cent in July, down from a recent April peak of 14.3 per cent but still above the pre-pandemic average of 10.8 per cent, according to StatCan. The picture remained starkest for Black youth, whose unemployment rate stood at 22.6 per cent, little changed from July 2025 and July 2024 – a persistent disparity not narrowing at the same pace as other demographic groups.
Looking further ahead, Hencic points to a structural consideration relevant for longer-term workforce planning. As Canada's population decline pressures talent strategies across industries and sectors, an aging workforce could lead to a shrinking workforce down the line. "Demographically speaking, as the country gets older, you would expect the share of people taking part in the workforce to shrink as population ages," he says. “We've seen a bit of a stalling out in the number of people in the labour force the last few months that started to rise again, so we'll see whether the number of workforce entrants can continue at this pace.”
One encouraging signal was a modest reversal of that trend in July. "There are folks out there who are looking for work, and there's a growing number of them," says Hencic.
Hencic’s overall impression of Friday’s numbers was measured but optimistic. "The recovery here in the past few months has been better than expected," Hencic said. "One month obviously doesn't make a trend – but if there's a little bit of momentum here, things could start to improve on the economic front."
