Good morning. The job market is on the Bank of Canada’s mind. But, spoiler alert: A speech to policy-makers and researchers at a Quebec think tank did not clear up the central bank’s decision-making ahead of future rate decisions. This complex labour equation is in focus today, along with a buggy summer forecast.

Oil and gas: Ksi Lisims reaches an LNG deal with Germany’s state-owned utility SEFE.

Trade: Washington’s top trade official says he sees a path to preferential tariff rates in North America if Canada and Mexico co-operate on external tariffs on other countries.

Health: The price of Canada’s best-selling drug, Ozempic, is starting to plummet as generic versions hit pharmacy shelves.

​Hi everyone, I’m Vanmala, and I cover labour, economics and the future of work.

Yesterday, the Bank of Canada’s external deputy governor, Nicolas Vincent, gave a very interesting speech in Montreal about employment and jobs. He warned that there has been a fundamental, structural shift in the country’s labour market that is making it much harder for workers to find jobs.

For context, Canada’s unemployment rate has gradually climbed in the post-pandemic era, inching up from roughly 5 per cent in late 2022, to just above 7 per cent by the fall of 2025. It has hovered around 7 per cent ever since, and economists have frequently described the current employment environment as lacklustre.

Vincent specifically called the current labour market a “low-hire, low-fire” environment.

That means employers are simply not hiring at the pace that they used to, but at the same time, the layoff rate has been low and relatively stable. Today, the ability to find a job “is close to its lowest point in 30 years,” Vincent said, adding that it is creating a sense of inertia amongst workers.

Why aren’t employers hiring?

Vincent attributes this to three key factors: economic uncertainty stemming from U.S. tariffs, interest-rate increases that began in late 2022, and an aging population.

The first two factors are compelling employers to scale back hiring, preferring to keep their workforce the same size while they weather economic headwinds.

In multiple surveys of businesses conducted by the central bank, employers have also emphasized that it is hard to replace experienced workers. In anticipation of the coming wave of retirements, employers are choosing to hang on to more seasoned and qualified employees as long as possible, the BoC found.

The bank analyzed Statistics Canada data that shows that since December, 2022, those aged between 55 and 64 have actually seen a rise in their employment rate (by almost one percentage point), compared to younger Canadians. The employment rate amongst youth, aged 15 to 24, has dropped by 5.5 percentage points since late 2022.

It is not just harder to find a job in the current economy, it is also taking much longer, Vincent said in his speech. He noted that the share of unemployed people looking for work for more than six months is the largest since the early 2000s.

The central bank attributes the rise in long-term unemployment to the skills gap: workers’ experience and the skills that employers are looking for are not matching up, and unemployed workers say their main obstacle is not having the right combination of skills and experience.

How does this impact the central bank’s decision-making around interest rates?

Under normal circumstances, a higher unemployment rate would imply slow growth in the economy, and the bank could respond to it by lowering interest rates to stimulate demand.

But if unemployment is being caused by structural changes that might last, rather than cyclical ones, that complicates matters. Vincent said that traditional monetary policy, such as lowering rates, would create inflationary pressure and delay “necessary restructuring in the economy.”

What to watch next

Additionally, unlike the U.S. Federal Reserve, the Bank of Canada does not have a mandate to target maximum employment. Our central bank’s mandate is to target 2-per-cent inflation. The bank has kept its policy rate at 2.25 per cent for four consecutive rate decisions. The next interest-rate announcement is on June 10.

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