A Bank of Canada interest rate hike this year looks less likely based on the latest jobs numbers , economists say. The economy added 8,000 positions in December, beating estimates for a loss of 2,500 jobs, while the

unemployment rate rose to 6.8 per cent from 6.5 per cent as more people looked for work, according to Statistics Canada.

Estimates had called for the unemployment rate to rise to 6.7 per cent, but it now stands 0.1 per cent above where it ended in 2024.

The jobs market significantly cooled down in December after adding an average of 60,000 positions per month from September to November.

Markets had placed a 70 per cent chance of a rate hike at the Bank of Canada’s final meeting of 2026, but those bets fell to a bit more than 60 per cent following the release of December’s employment data.

The Bank of Canada cut interest rates to 2.25 per cent in October and indicated at the time that it felt that was an appropriate level to help support the economy, quashing hopes for further reductions.

Here’s what economists had to say about the latest labour numbers and what they mean for the Bank of Canada and interest rates.

‘Grasp on reality’: BMO

“Today’s ho-hum report likely has a better grasp on reality,” Douglas Porter, chief economist at

Bank of Montreal , said in a note, adding that the supersized gains during the previous three months left him “skeptical” with the fall in the unemployment rate to 6.5 per cent in November coming as a “shock.”

He said the December data settled those misgivings and the pace of job gains now strikes him as more “realistic.”

Still, Porter doesn’t think these results will catch the Bank of Canada’s attention, but they will tamp down talk of a rate hike this year.

BMO expects the Bank of Canada to remain on hold on interest rates this year.

‘Still plenty of room’: CIBC

CIBC Capital Markets economist Andrew Grantham cast doubt on the surprise drop in the unemployment rate to 6.5 per cent in November, saying it was likely exaggerated by a decline in those looking for work.

December reversed that trend as the number of people seeking employment — the participation rate — rose by 81,000, which offset the drop in the prior month.

“We don’t anticipate a renewed decline in participation and see today’s unemployment rate as a more accurate representation of actual slack within the economy,” he said.

Slack means there are more workers to go around than jobs, which is one key to keeping inflation at bay.

“With more people once again looking for work, today’s unemployment rate suggests that there’s still plenty of room for non-inflationary growth before the Bank of Canada will need to think about interest rate hikes,” Grantham said.

CIBC expects the Bank of Canada to hold interest rates at the current level for the remainder of the year.

‘Temporary moves’: Capital Economics

December’s jobs report was about undoing some “temporary moves” from the previous month, Bradley Saunders, North America economist at

Capital Economics Ltd. , said in a note. For example, December unwound roughly half of the “unseasonally” strong gains in youth employment in November, he said, while part-time positions fell after posting gains that surprised him.

“With private-sector hiring also flat last month, December’s Labour Force Survey works against the view of some that the Bank of Canada will eventually return to rate hikes later this year,” he said.

‘Down to earth’: Desjardins

“After a couple of sky-high hiring prints, Canada’s labour market came back down to earth in December,” Royce Mendes, head of macro strategy at

Desjardins Securities , said in a note. The unemployment rate might be up because more people were looking for work, but he said that’s a “better driver” than if it had risen due to layoffs.

Statistics Canada said the layoff rate matched historical levels for this period.

Mendes said the higher unemployment rate points to more slack in the economy.

“While hiring was soft and the unemployment rate rose, the survey wasn’t weak enough to alter expectations for the Bank of Canada,” he said.

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