CAD: Gradual improvement expected in labour – RBC

⦿ Executive Snapshot

• What: Canada experienced a loss of 18,000 jobs in April, contributing to a total of 112,000 job losses in 2026.
• Who: Royal Bank of Canada (RBC) and economist Claire Fan.
• Why it matters: The increase in unemployment to 6.9% signals ongoing labor market challenges, yet there is an expectation of gradual improvement driven by resilient domestic spending.

⦿ Key Developments

• Canada lost 18,000 jobs in April, resulting in a cumulative loss of 112,000 jobs in 2026.
• The unemployment rate increased to 6.9%, matching the level from April of the previous year.
• Hours worked remained flat while the labor force participation rate increased.
• Rising unemployment was attributed to weak hiring rather than layoffs, with permanent layoffs declining by 10% from their peak in October 2025.
• RBC anticipates that resilient domestic spending will support gradual improvements in labor conditions throughout the year.

⦿ Strategic Context

• The historical trend indicates that job losses are not primarily driven by layoffs, but rather by weaker hiring practices in the current economic climate.
• The broader narrative involves the ongoing recovery of the labor market, with expectations that domestic economic activity will boost job creation in the near future.

⦿ Strategic Implications

• Immediate consequences may include continued challenges in the labor market, affecting consumer confidence and spending.
• Long-term implications suggest that if domestic spending remains strong, it could lead to improved labor conditions and potentially lower unemployment rates in the future.

⦿ Risks & Constraints

• A potential risk includes regulatory or economic uncertainties that could hinder hiring and job creation.
• Competition for jobs may intensify, particularly among new entrants to the labor market, leading to sustained unemployment levels.

⦿ Watchlist / Forward Signals

• Key indicators to watch include the upcoming employment reports and changes in domestic spending patterns.
• Future developments that signal success or failure will revolve around hiring trends and the response of businesses to economic conditions.