Data from 2026 thus far has shown Canada’s labour market conditions slowing with the economy losing jobs and the unemployment rate moving higher. However, Bank of Canada (BoC) External Deputy Governor Nicolas Vincent said that the labour market may not only be slowing down, but it may also be going through a structural change. Vincent believes this is evidenced by its current “low-hire, low-fire” environment. While the BoC can make monetary policy changes to help support the labour market, shifting monetary policy is less effective during times of structural change.

• The BoC External Deputy Governor gave a speech in Montreal yesterday, where he discussed the major trends he is seeing in Canada’s labour market. Those trends, he says, point to a labour market that is going through a period of structural change, limiting the BoC’s efforts to support it.
• Vincent says Canada’s labour market is experiencing more than just a slowdown in response to low turnover, increasing long-term unemployment and low youth employment.
• Low turnover means a “less dynamic” labour market, raising the risk that the reallocation of workers from weaker to more productive sectors moderates.
• Vincent cautioned that stimulating consumer demand through lower interest rates to help boost employment could heighten inflationary pressures.
• An aging population is a major contributing factor to this structural change, according to the External Deputy Governor. Business expressed concern replacing experienced workers and are spending more to hire and train new hires. Another contributing factor is the rise of artificial intelligence.

Ultimately, Vincent said the country needs to reconsider its approach to education and training, particularly for younger workers. The BoC makes its next interest rate announcement on June 10. The BoC is navigating its monetary policy through a delicate balance of rising inflation with slowing economic activity and weaker labour market dynamics.

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