Claire Fan, senior economist at RBC, joins BNN Bloomberg to discuss Canada’s labour sector ahead of BoC’s January rate decision.

Canada’s December employment report is expected to be closely watched as the Bank of Canada prepares for its first interest-rate decision of the year. Economists are assessing whether recent labour market strength is beginning to moderate without signalling renewed economic weakness.

BNN Bloomberg spoke with Claire Fan, senior economist at RBC, about expectations for the December jobs report, signs of stabilization across key sectors and how labour market trends could influence the central bank’s policy path in 2026.

Key Takeaways

  • December employment data is expected to be an important input for the Bank of Canada’s January policy decision.
  • A modest pullback in employment would reverse part of recent gains without signalling renewed labour market deterioration.
  • Job growth has been supported by part-time hiring, younger workers and strength in non-cyclical sectors such as health care.
  • Trade-exposed sectors including manufacturing, transportation and warehousing are showing early signs of stabilization.
  • Labour market trends could influence the timing of future rate hikes, though expectations remain centred on 2027.

Claire Fan, senior economist at RBC Claire Fan, senior economist at RBC

Read the full transcript below:

ROGER: One of Canada’s big banks, RBC, says the December job numbers are a key input for the Bank of Canada’s upcoming decision. Let’s get more on this from Claire Fan, senior economist at RBC. Claire, thanks, as always, for joining us.

CLAIRE: Thanks for having me, Roger.

ROGER: What are we looking at for the numbers right now?

CLAIRE: For the headline numbers, we are expecting a 35,000 loss in employment, as well as a tick higher in the Canadian unemployment rate to 6.8 per cent. Now, on the surface, these numbers might indicate a pretty significant softening in the labour market in usual times, but it is the context that really matters. Between September and November, what we saw was consecutive strong gains in the job market, about 180,000 over those three months. So what we’re expecting for December is a partial reversal of that solid trend, and it would still leave the jobs market quite a bit stronger relative to where it was a quarter ago.

ROGER: Those numbers were really unexpected. Is this just more of a reality check?

CLAIRE: Yeah, absolutely. Again, the 180,000 job growth we’ve seen over the past three months between September and November. And if we look at where that job growth has been coming from, we’ve seen a lot of increases in part-time jobs and among younger workers as well, which could indicate that, to some extent, the gains have been boosted by challenges with seasonally adjusting the data around holiday hiring periods. But we’ve also seen fairly strong job growth in health care, which is not typically a cyclical segment. More importantly, for us, are signs of stabilization in some of the more trade-exposed sectors, including manufacturing, transportation and warehousing, which combined have accounted for over 50,000 of the 180,000 gain over those months.

ROGER: I imagine stabilization in those sectors would be a good thing right now, considering everything that’s been unfolding.

CLAIRE: Yeah, absolutely. Toward the end of 2025, we were really starting to see some very good signs. Job reports, apart from hiring demand indicated by job postings data, have started to come back. Throughout the year, Canadian consumers have also been behaving fairly resiliently toward the end of last year. We at RBC track consumer spending and saw a big surge around the holiday discounting periods just ahead of the holidays. Of course, there were idiosyncratic events as well. I don’t know if you still remember the Blue Jays postseason run. So there are a lot of reasons to expect some cautious optimism for the economic backdrop as we head into 2026.

ROGER: Going back to expectations for December, you expect a drop-off for part-time and younger workers after the nice increases they’ve seen. Wouldn’t December be one of those months when those people would be finding jobs?

CLAIRE: Yeah, absolutely. That’s why we’re not expecting a full reversal, but merely a partial reversal. Again, our expectations are relatively softer compared with market consensus, which is also expecting a job loss, but a much smaller one, and an unemployment rate of 6.7 per cent.

ROGER: Heading into the year, are there any indicators of where the unemployment rate might go? There’s so much that could happen this year.

CLAIRE: We are expecting broad improvement in the Canadian labour market, with the unemployment rate gradually moving lower to 6.3 per cent by the end of the year. That expectation is also very much in line with what the Bank of Canada has been communicating for 2026. While the central bank does not forecast the unemployment rate itself, it sees labour market indicators as a very important input into its decisions. We know that because, at the December meeting, it specifically mentioned recent improvements in labour markets, alongside softer hiring demand going forward. So this expectation for a gradual recovery in the jobs market is very much aligned between us and the central bank.

ROGER: That segues nicely into what we can expect from the central bank in 2026.

CLAIRE: I like how you phrased the question, because it’s not about what we expect from January, which is not a lot. The question is really what we expect for the full year. The key to that is partly tied to the numbers we’ll see in Friday’s report, mostly around the risks. We are expecting a softer report, and the Bank of Canada will likely be holding similar expectations. If the report comes in stronger, and if this were to be a fourth consecutive strong job gain, the implications would be more meaningful for the Bank of Canada, which tends to view this data on a three-month horizon. That would suggest labour market improvement is happening faster than expected and could pull forward discussions around rate hikes, which we currently expect in 2027, into 2026. By comparison, downside risks from weaker-than-expected numbers would likely be less meaningful from the Bank of Canada’s perspective.

ROGER: We’ll have to leave it there. Always appreciate talking to you, Claire. Thanks for joining us.

CLAIRE: Thanks for having me.

ROGER: That was Claire Fan, senior economist at RBC.

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This BNN Bloomberg summary and transcript of the Jan. 6, 2026 interview with Claire Fan are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.