Hencic points to strong second-quarter gross domestic product (GDP) growth as a tailwind, noting the data suggests “the second quarter of 2026 is going to be very strong.” But he notes that some of that bounce-back reflects the smoothing of first-quarter disruptions, including weather-related impacts. TD Economics’ June forecast called for annualized Q3 and Q4 growth of 1.9 and 1.7 per cent respectively – though Hencic believes Q2 is likely to come in stronger, which may temper those numbers slightly.
The Bank of Canada, weighing tariff risks against upward energy price pressures, has held rates steady. “We think the balance of risk is such that [the rates] stay on hold as the economy gradually continues to recover,” says Hencic. “The unemployment rate is at its lowest level in quite some time, but it’s still at 6.4 per cent, which is indicative of an economy, a labour market that still has slack in it.”
Private sector rebound signals talent competition ahead
The July data revealed a clear divergence between public and private sector employment. Public sector employment declined by 27,000 (-0.6 per cent), while private sector jobs grew by 58,000 (+0.4 per cent) and self-employment rose by 44,000 (+1.6 per cent). Since April, private sector employment is up 146,000 and self-employment by 73,000, according to StatCan.
“The return of dynamism in the private sector is encouraging,” says Hencic, noting that former public-sector employees are unlikely to leave the labour force entirely. “They’re going to be looking for work – if not in the public sector, then in the private sector. That shifting composition may indicate that as well.”
Hencic believes that the quality of those private sector gains matters. “If we can start to see those job gains continue to pick up in the private sector, that would be encouraging,” he says. “We would hope that’s in high-productivity industries and helps raise livelihoods across the board.”