Canada delivered another big jobs surprise with 54,000 new jobs, pushing the unemployment rate down sharply. Markets have priced in future increases as yields rise, although analysts still expect the Bank of Canada (BoC) to remain steady through 2026, TDS economists Robert Booth and Emma Lawrence note.
Bank of Canada continues to see rates steady despite hot data
“CAD employment posted another sharp bullish surprise with 54K jobs created in November, beating expectations for a modest decline to recent strength (TD: -15K, Market: -2.5K). Weak labor force participation contributed to a 0.4 basis point decline to 6.5% for the unemployment rate, while wage growth held steady at 4.0% y/y for permanent workers.”
“Today’s report extends performance from September/October, pushing the 3M trend to 60.2K. BoC December already looked like a comfortable hold before the data came out, and while stronger labor market conditions may lead to the BoC focusing more on inflation risks, we still look for it to remain steady at 2.25% into next year.”
“The market went into a frenzy as the upside surprise sparked selling across the curve. Yields rose on the front end by 16 basis points, and cross-currency spreads reached some of their widest levels since early 2024. Notably, while the market has now added hikes to the narrative for 2026, we still see the Bank of Canada on hold for 2026 and rising in early 2027.”
