Data Flash: Canadian labour market data bounced back in May

What the desk is arguing

The desk posits that the bounce-back in Canadian employment is indicative of strengthening labor market conditions. Per the full note from RBC, the 88,000 jobs added in May comes on the heels of a disappointing GDP report, raising questions about economic growth but simultaneously showcasing the resilience in job creation.

Supporting this thesis is the notable rise in full-time jobs, as well as the recent decrease in the unemployment rate from 6.9% to 6.6%, reflecting ongoing improvements in worker conditions since a peak of 7.1% in mid-2025. However, it is important to remain guarded as this is still only the second employment increase in five months, and the broader economic environment presents significant hurdles.

Where it sits in our coverage

While our consensus target for USD/CAD is 1.075 with a range between 1.04 and 1.12, firms are divided in their perspectives: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

The optimistic view from the desk aligns with jpmorgan, which sees a stronger outlook for USD/CAD, although it remains at the upper bound of existing expectations. Conversely, bofa maintains a more cautious stance, presenting a significantly lower target.

How other firms see it

Opinions are split among major analysts regarding Canadian economic strength. Aligned with the desk's view, firms like jpmorgan and citi advocate for a bullish stance on the Canadian dollar due to the labor market's recent resilience. On the opposing side, bofa holds a more pessimistic outlook, signaling ongoing concerns about broader economic stability.

This divergence in views might play a crucial role in the USD/CAD trajectory, particularly as market participants monitor the potential impact of upcoming trade negotiations and domestic economic indicators, such as retail sales and inflation data.