The stronger-than-expected July report arrives as the Bank of Canada weighs the durability of an economic rebound that appeared to take hold in the second quarter. GDP was essentially flat in the first quarter, held back by a drop in government spending, auto-plant retooling, and a pullback in oil-and-gas investment. The central bank's July Monetary Policy Report estimated that growth rebounded to about 2.5% in Q2, though it characterized much of the pickup as the unwinding of those temporary drags. The Bank held its policy rate at 2.25% on July 15, its sixth consecutive meeting without a change, and signaled that inflation โ which hit 3.2% in May on higher gasoline prices โ should ease as oil prices and refinery margins decline.
Wage growth has shown signs of moderating. Average hourly wages for permanent employees rose 3.3% year-over-year in June, up from 3.0% in May, but forecasters expected the pace to slip toward 3.4% in July as a strong comparable from July 2025 drops out of the calculation. The Bank of Canada has noted that core inflation measures are already near 2%, and that labour market slack remains elevated by historical standards.