This was the week the Canadian and US economies split screen. South of the border, a weak jobs report revived hopes for a Federal Reserve rate cut, which we covered in our US market recap. North of the border, the story flipped: Canada delivered a surprise hiring boom that pushed unemployment to a two-year low. For investors, that contrast is the whole story, because it points the two central banks in opposite directions.
Why did Canada's job market defy expectations?
Statistics Canada reported that the economy added 75,000 jobs in July, roughly double what forecasters expected. The unemployment rate fell to 6.4%, its lowest level in two years, and the employment rate ticked up to 60.9%. The gains were broad and healthy, split almost evenly between full-time (38,600) and part-time (36,600) work.
The strength ran through the private sector. Hiring rose in wholesale and retail trade, in finance, insurance and real estate, in professional and technical services, and in construction. Ontario led the country with 52,000 new jobs, followed by British Columbia. The main soft spots were public administration and agriculture.
There was one important wrinkle for the inflation picture: wage growth cooled to 2.8% year over year, down from 3.3% in June. A tightening job market with slowing wage pressure is close to the ideal mix for a central banker.
Will the Bank of Canada cut rates in September?
Almost certainly not. The Bank of Canada has held its policy rate at 2.25% for six consecutive meetings, and this jobs report gives it every reason to keep holding. A resilient labor market removes any urgency to cut, and bond markets now price the next meeting on September 2 as a near-certain hold, with even a small chance the Bank could eventually lean toward a hike rather than a cut.
This is the mirror image of the US setup. The Fed is being pushed toward easing by a softening jobs market, while the Bank of Canada is being kept on the sidelines by a firming one. When two neighboring central banks diverge like this, it usually shows up first in the currency.
How did the TSX and the Canadian dollar react?
The stock market took the news well. The S&P/TSX Composite held near record territory, closing around 36,400 after a solid rally on Friday. Canada's index has quietly been one of the steadier performers this year, anchored by its heavy weighting in banks, energy and materials. Rate-sensitive dividend payers like Royal Bank of Canada (RY.TO) and TD Bank (TD.TO), along with energy names such as Enbridge (ENB.TO) and Canadian Natural Resources (CNQ.TO), remain the backbone of the market. If you want the full list, see our guides to the best Canadian dividend stocks and best Canadian ETFs.
The Canadian dollar was the more interesting mover. The loonie firmed on the strong data to about 71.7 US cents, or roughly C$1.39 to the US dollar. That is a bounce, but it is worth being honest: the loonie is still historically weak, weighed down for months by trade tensions and a wide interest-rate gap with the US. A stronger job market and a Bank of Canada that will not cut are two things that support the currency from here.
Where does Canada stand in the global economy?
Canada enters this stretch as a resilient but exposed trading nation. The biggest overhang is US tariffs, which are projected to leave Canadian GDP roughly 1.5% lower by the end of 2026 than earlier forecasts assumed. The direct tariffs are concentrated in sectors like steel and aluminum, but the drag on exports is felt more broadly.
Even so, Canada is holding up better than the headlines suggest. GDP is still expected to grow around 1.1% in 2026 and 1.5% in 2027, a recession has been avoided, and Canada enjoys the lowest average tariff rate of any major US trading partner at about 5.2%. As a net oil exporter and a stable, reliable energy supplier in a world full of geopolitical risk, Canada also stands to benefit from strong global demand for its resources. Against an IMF backdrop of 3.3% global growth, that is a solid position for a mid-sized, resource-rich economy.
What should investors watch next?
Three things. First, the Bank of Canada decision on September 2, where the language matters more than the rate, since a hold is already priced in. Second, the tariff file, which remains the single biggest swing factor for Canadian growth and the loonie. Third, whether wage growth keeps cooling, because that is what ultimately decides how long the Bank can stay comfortable on hold. You can track any Canadian name on our stock pages and compare the TSX heavyweights directly.
Bottom line
Canada spent this week proving it is not simply a smaller copy of the US economy. A surprise jobs boom, a two-year low in unemployment, and cooling wages leave the Bank of Canada firmly on hold while the Fed leans the other way. The TSX is near records, the loonie is bruised but firming, and the economy is absorbing tariffs better than feared. For Canadian investors, the message is patience: this is a steady, resource-anchored market with a central bank in no rush to move, and that stability is worth more than it looks.
Previous market recap: Stock Market Today (August 7, 2026)Screen stocks and compare valuations with our Stock Screener.
