Canada's unemployment rate drops to 6.6% as economy gains 88,000 jobs

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.

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.