Canada’s low hire low fire labour market is giving the Bank of Canada a more complicated signal.

In remarks at CIRANO in Montréal on May 26, 2026, Bank of Canada External Deputy Governor Nicolas Vincent said Canada’s labour market is slowing, but not through a classic layoff cycle. Instead, employers are hiring less, workers are moving less, and unemployed Canadians are taking longer to find work.

That matters for the BoC rate debate because weak hiring can reflect softer demand, but it can also point to deeper structural changes that interest rates cannot easily fix.

Canada’s Labour Market Is Slowing, Not Collapsing

Vincent said Canada has added about 6,000 jobs per month on average since early 2025, compared with almost 34,000 per month in 2024. He also said current labour market conditions point to mild excess supply.

The employment rate has fallen by 0.6 percentage points since January 2025, while unemployment has stayed around 6.5% to 7%.

That is a softer labour market, but not a classic jobs shock. The bigger issue is that hiring has slowed sharply, making it harder for unemployed workers to get back into work.

Low Hiring Adds a New Risk

The key phrase from Vincent’s speech was “low hire, low fire.”

Layoffs have stayed low and relatively stable, even as unemployment has risen from about 5% in early 2023 to 6.9% last month. Since 2022, unemployed workers have faced much weaker job-finding conditions, now close to their weakest point in 30 years.

This creates a labour market that can look calm on the surface, but feel stuck underneath.

Workers have fewer opportunities. Businesses delay hiring decisions. New entrants struggle to break in. Over time, that can reduce labour mobility and weigh on productivity, innovation and competitiveness.

Weak Hiring Adds a New Layer to the BoC Rate Debate

The Bank of Canada held its policy rate at 2.25% at its April 29, 2026 decision. The next scheduled rate announcement is June 10, 2026.

Vincent’s speech does not signal an immediate rate cut. Instead, it shows why the policy debate is harder.

If weak hiring is mainly cyclical, lower rates could eventually help support demand. But if the slowdown reflects structural issues such as skills mismatch, population aging, trade disruption or AI-related shifts, monetary policy has less power to fix it.

That is why weak hiring adds a new layer to the BoC rate debate.

Youth and Long-Term Unemployment Are Warning Signs

Vincent also pointed to long-term unemployment and youth unemployment as areas to watch.

The share of unemployed people looking for work for more than six months has been unusually high outside the pandemic period. Longer unemployment spells can weaken skills, discourage workers and make it harder to reconnect with employers.

Young Canadians are also feeling the pressure. The unemployment rate for people aged 15 to 24 was 9% in 2022, the lowest on record. Nearly four years later, it is above 14%. Young people now make up almost a quarter of the long-term unemployed, more than double their share in 2022.

The Signal Beneath the Jobs Data

Vincent’s broader message was that Canada needs to understand whether labour market weakness is temporary or structural.

A temporary slowdown can be addressed through demand management. A structural slowdown requires adjustment, training, productivity improvement and better labour market matching.

The Bank’s role is not only to set interest rates. Vincent said it also has a responsibility to push its analysis further and communicate clearly so households, businesses and governments can make better decisions.

A Softer Job Market With Harder Policy Choices

Canada’s labour market is not flashing a classic jobs crisis. It is showing something more subtle.

A low hire low fire labour market means fewer layoffs, but also fewer opportunities. That may reduce immediate recession fears, but it also creates a slower and stickier kind of weakness.

For the Bank of Canada, the challenge is not just whether the economy is weak. It is why the economy is weak.

Can the BoC respond to weak hiring with lower rates, or is this slowdown rooted in deeper structural change?