Canada's job market appears to be finding its footing, according to a new forecast from RBC Economics. The research arm of Royal Bank of Canada expects the upcoming July Labour Force Survey to show the economy added about 5,000 jobs, with the unemployment rate holding steady at 6.5%.
If realized, that would mark a continuation of the modest gains seen in May and June, suggesting the sharp deterioration in hiring that worried economists earlier this year has largely run its course. RBC described the July report as the first major check-in on the labor market this quarter, and its forecast points to conditions that are stabilizing rather than re-accelerating.
What's behind the stabilization?
RBC's outlook is based in part on job-postings data, which the bank says has been broadly unchanged heading into July. That stability suggests employers have stopped pulling back on hiring, even if they aren't rushing to add workers at a rapid clip.
The forecast comes against a backdrop of persistent uncertainty over U.S. trade policy, which has weighed on Canadian businesses that depend on cross-border commerce. Despite those headwinds, the labor market appears to be absorbing the shock better than some feared.
Still, RBC notes that total employment remains slightly lower so far in 2026 compared with the same period last year. In other words, the job market is stabilizing, but it hasn't fully recovered the ground lost earlier in the year.
Why the jobs report matters
The Labour Force Survey is Canada's most closely watched monthly snapshot of the job market. It provides the unemployment rate, employment numbers, and details on which sectors and regions are adding or losing jobs. For the Bank of Canada, the report is a key input for interest rate decisions, as the central bank balances its mandate to keep inflation low with supporting maximum employment.
A steady unemployment rate of 6.5% would suggest the economy is neither overheating nor falling into a deep slump. That could give policymakers room to hold rates steady, or at least avoid aggressive cuts, depending on how inflation trends.
For everyday investors, the jobs report matters because it influences everything from consumer spending to corporate earnings. A stable labor market supports household incomes, which in turn underpins retail sales, housing demand, and the broader economic growth that drives stock market returns.
What it means for investors
For investors, the key takeaway is that Canada's economy is showing resilience in the face of trade uncertainty. A labor market that is steadying rather than weakening reduces the risk of a sharp economic downturn, which is generally positive for Canadian equities and the Canadian dollar.
However, the forecast also suggests that the job market is not booming. With hiring demand flat, wage growth may remain moderate, and consumer spending could stay subdued. That could weigh on companies in rate-sensitive sectors like housing and discretionary retail.
Investors should also keep an eye on the actual July jobs report when it is released, as any significant deviation from RBC's forecast could move markets. A much stronger number might fuel expectations of higher interest rates, while a weak report could reignite concerns about the economy's health.
RBC's view aligns with other recent signals from global labor markets. For instance, Australia's job ads rose modestly in July, indicating steady hiring demand there as well. And in the U.S., factory activity hit a four-year high on the back of strong orders and hiring, pointing to a resilient manufacturing sector south of the border.
These cross-border trends suggest that while trade tensions remain a concern, the broader North American economy is holding up better than many anticipated. For Canadian investors, that's a reason for cautious optimism, but not complacency.
The bottom line
RBC's forecast of 5,000 new jobs and a 6.5% unemployment rate paints a picture of a labor market that has stopped losing momentum. It's not a boom, but it's a far cry from the sharp declines that some had feared.
As always, the actual data could surprise. But for now, the message from RBC is that Canada's job market is steadying into July, providing a measure of stability for the economy and investors alike.
