Canada’s economy added 18,000 jobs in June as the national unemployment rate declined to 6.5%, providing further evidence that the labour market is recovering from the weakness recorded during the opening months of 2026. Statistics Canada said employment increased 0.1% from May, while the employment rate—the proportion of the working-age population that is employed—rose by 0.1 percentage points to 60.8%.

The June increase was modest compared with the revised gain of nearly 88,000 jobs in May, but it was slightly stronger than the approximately 10,000 positions expected by economists. The unemployment rate fell from 6.6% and returned to the level recorded in January. It was the second consecutive monthly decline after the rate dropped by 0.3 percentage points in May.

Importantly, the improvement in unemployment did not result from a meaningful contraction in the available workforce. The number of people participating in the labour market was little changed, and the participation rate held at 65.0%. Employment growth exceeded the small increase in the labour force, allowing the unemployment rate to edge lower.

The figures extend a recent period of stabilization after employers reduced staffing during several of the first four months of the year. Employment was 99,000 higher than in June 2025, an increase of 0.5%. The year-over-year gain was driven by full-time employment, which was up by 131,000 positions, although the monthly composition in June was less robust.

Almost all of the June increase came from part-time work. Full-time employment was essentially unchanged, while part-time employment rose by about 18,000. This distinction tempers the strength of the headline result because part-time hiring typically contributes fewer total working hours and may reflect temporary, seasonal or discretionary service-sector demand.

The employment relationship also shifted toward private-sector and self-employed work. The number of private-sector employees increased by 32,000 after a gain of 56,000 in May. Public-sector employment declined by 31,000, while self-employment rose. Over the previous 12 months, the expansion in employment was concentrated primarily among private-sector workers.

The sector breakdown showed a clear divide between services and goods-producing industries. Services added approximately 62,000 positions, while goods-producing industries lost about 44,000. Accommodation and food services employment increased by 15,000, or 1.2%, marking a third consecutive monthly gain and lifting employment in the industry by 39,000 from a year earlier.

Wholesale and retail trade also contributed to service-sector hiring, as did information, culture and recreation. These industries tend to employ comparatively large numbers of younger and part-time workers. Their gains coincided with stronger summer employment among students and increased hospitality activity, although analysts cautioned against attributing the national figures directly to sporting events or other temporary factors without more detailed evidence.

Manufacturing moved in the opposite direction. Employment in the sector declined by 17,000 in June, reversing the majority of May’s increase. Manufacturing employment was down by a net 61,000 positions, or 3.2%, from its recent peak in January 2025. The decline has occurred during a period of tariff-related uncertainty, shifting supply chains and cautious capital spending among trade-exposed businesses.

The manufacturing figures remain an important indicator of underlying economic risk because the sector is closely connected to exports, transportation, machinery investment and Canada’s commercial relationship with the United States. Continued employment losses could weigh disproportionately on industrial communities and on provinces with large automotive, metals, machinery and processing operations.

Agriculture lost approximately 7,600 positions in June, while employment in utilities fell by about 7,300. The weakness in these industries reinforces the uneven nature of the recovery: consumer-facing and seasonal services are adding workers, but several capital-intensive and goods-producing sectors continue to face pressure.

Young workers were the clearest source of improvement. Employment among people aged 15 to 24 increased by 33,000, or 1.2%, with most of the gain occurring in part-time positions. The youth employment rate rose to 55.1%, while the youth unemployment rate fell by 0.7 percentage points to 12.7%. The rate also declined in May, meaning youth unemployment has fallen by a combined 1.6 percentage points in two months.

Despite that progress, youth unemployment remains above its pre-pandemic norm. The June rate compared with an average of 10.8% between 2017 and 2019. The gap shows that younger job seekers continue to face more competition and more limited opportunities than they did before the pandemic, particularly when seeking their first position or attempting to move from education into permanent employment.

Conditions improved for students planning to return to school in the fall. Their unemployment rate was 15.3%, down from 17.4% in June 2025 but still above the pre-pandemic June average of 13.0%. Outcomes varied significantly by age. Returning students aged 20 to 24 recorded an unemployment rate of 8.2%, compared with 16.5% for those aged 17 to 19 and 30.6% for those aged 15 or 16.

Employment among people aged 25 to 54 also increased by 33,000. Within that core working-age group, the unemployment rate held at 5.5% for women and 5.7% for men. The stability of those rates, alongside positive employment growth, suggests that the central portion of the workforce is experiencing gradual improvement rather than a sharp rebound.

Workers aged 55 and older had a weaker month. Employment in the group declined by 47,000, or 1.1%, while its unemployment rate increased by 0.2 percentage points to 5.2%. The decline offset much of the hiring recorded among youth and core-aged workers, highlighting the importance of demographic composition when assessing the monthly headline figure.

Other labour-market indicators were cautiously constructive. The job-finding rate—the proportion of unemployed people who moved into employment between May and June—rose to 24.3%, compared with 21.3% during the corresponding period a year earlier. At the same time, the layoff rate held at 0.6%, matching both its year-earlier level and its average from 2017 to 2019.

That combination is consistent with a “low-hire, low-fire” labour market. Businesses are not expanding payrolls aggressively, but broad layoffs have also remained limited. Such conditions can produce stable headline employment while still making it difficult for new entrants, displaced workers and people seeking better positions to find jobs quickly.

Wage growth accelerated despite the moderate pace of hiring. Average hourly wages among employees rose 3.3% from a year earlier to C$37.20, compared with annual growth of 3.0% in May. Wages for permanent employees, a measure watched closely by the Bank of Canada, increased at a somewhat faster annual pace.

Stronger wage growth supports household incomes and consumer spending, but it may also concern monetary policymakers when productivity growth is weak. Sustained compensation gains that are not matched by stronger output can increase labour costs per unit of production and make inflation more persistent, particularly in service industries where wages represent a large share of expenses.

The jobs report arrives against a mixed macroeconomic background. Real gross domestic product by industry grew 0.5% in April after contracting 0.1% in March, supported by both goods-producing and service industries. Statistics Canada’s preliminary estimate indicated that output increased a further 0.1% in May. Total hours worked also advanced in June, providing a potentially positive signal for economic activity at the end of the second quarter.

Inflation, however, has moved higher. Canada’s Consumer Price Index increased 3.2% year over year in May, up from 2.8% in April, largely because of higher gasoline prices. Inflation excluding gasoline was lower at 2.2%, indicating that energy accounted for a substantial portion of the acceleration, although food and transportation costs also remained sources of pressure.

The Bank of Canada held its overnight rate at 2.25% in June, citing weak domestic activity, uncertainty surrounding U.S. trade policy and the inflationary effect of elevated oil prices. Its next policy announcement is scheduled for July 15. The June employment figures represent the central bank’s final major labour-market reading before that decision.

The report is unlikely to change expectations for an unchanged policy rate. The lower unemployment rate, improving job-finding rate and faster wage growth reduce the immediate argument for another interest-rate cut. At the same time, part-time hiring, manufacturing weakness and subdued year-over-year employment growth do not indicate the kind of excess demand that would ordinarily justify tighter monetary policy.

The Bank’s second-quarter Business Outlook Survey also showed that employment intentions remained below their historical average. Firms reported weaker sentiment and softer sales expectations outside energy-producing regions, while higher oil prices lifted input costs and near-term inflation expectations. Those results suggest employers remain cautious even as the official employment data improve.

Regional developments were similarly uneven. Employment increased by 4,800 in Nova Scotia and by 2,900 in Saskatchewan. Quebec added approximately 14,000 positions for a second consecutive monthly gain, while employment was little changed in Ontario and British Columbia. Quebec’s unemployment rate stood at 5.4%, compared with 7.0% in Ontario and Alberta and 6.5% in British Columbia.

The provincial figures also illustrate the different economic forces affecting the country. Energy-producing regions have benefited from stronger commodity-sector investment, while manufacturing-intensive regions remain more exposed to tariffs and trade uncertainty. Tourism, hospitality and consumer services have supported hiring in several urban markets, but those industries are also sensitive to fuel costs, discretionary spending and seasonal fluctuations.

Canada’s slower population growth is becoming increasingly relevant to the interpretation of monthly employment numbers. As growth in the working-age population and labour force moderates, the economy may require fewer new positions each month to prevent unemployment from rising. An increase of 18,000 jobs would have been insufficient during periods of rapid population expansion, but it was enough in June to reduce the unemployment rate.

The June report therefore presents a cautiously improved picture rather than a decisive acceleration. Employment has recovered much of the ground lost earlier in the year, unemployment has fallen for two months and layoffs remain contained. Yet the reliance on part-time service employment, persistent weakness in manufacturing and elevated unemployment among young workers indicate that considerable slack and uncertainty remain.

For households and businesses, the near-term outlook will depend on whether the recent improvement broadens into full-time, higher-productivity industries. For monetary policymakers, the central question is whether a stabilizing labour market can coexist with easing underlying inflation. June’s data support the view that Canada is moving away from labour-market deterioration, but they do not yet establish a strong or uniformly distributed expansion.