How does Canada’s labour market look compared to the U.S.?

BMO Economics highlights stark differences between Canada’s and the U.S.’s labor markets in 2026, with the U.S. showing resilience while Canada lags. The U.S. labor market has regained momentum, with average monthly nonfarm payroll gains of 114,000 in the first five months of 2026, reversing prior losses and stabilizing unemployment at 4.3%. Hiring has expanded beyond health care, though tech layoffs persist due to AI-driven restructuring. In Canada, May saw an 88,000-job rebound, lowering unemployment to 6.6% from a September peak of 7.1%, but gains failed to offset prior losses of 112,300 jobs. Employment growth remains concentrated in health care, accounting for four-fifths of the 147,000-year-over-year increase, leaving other sectors weak. BMO notes Canada’s real GDP has contracted in three of the past four quarters, meeting a technical recession definition, though the bank avoids declaring one. Wage pressures in the U.S. remain contained, with 2.8% productivity growth limiting unit labor costs to 0.5% year-over-year. Canada’s labor market recovery is fragile, with hiring momentum uneven and challenges persisting despite May’s improvement. BMO’s report warns HR professionals to prepare for divergent hiring and wage environments across the border. The U.S. benefits from AI-led investment and reduced trade uncertainty, while Canada’s growth narrows sharply. BMO senior economist Sal Guatieri attributes the gap to structural differences, with U.S. hiring stabilizing unemployment and Canadian job gains failing to reverse broader economic weakness. The outlook suggests Canada’s labor market will struggle to match U.S. resilience through 2026.