Canada’s labour market showed a modest employment gain of 8,000 in December, following a previous three-month increase of 181,000. The unemployment rate rose from 6.5% to 6.8%, primarily due to more people seeking work rather than increased layoffs. Despite this rise, the rate remains lower than October’s 6.9% and September’s peak of 7.1%.<\/p>\n
Trade-exposed sectors such as manufacturing and transport and warehousing, which faced job losses during the summer, saw stabilisation by year’s end. Employment in these sectors was stable month-over-month in December and stood 22,000 higher than December 2024 levels. <\/p>\n
The overall report suggests a gradual improvement in the Canadian labour market, aligning with Bank of Canada expectations. It supports the bank’s near-term policy strategy of maintaining current interest rates, with potential hikes projected for 2027. The recovery is ongoing, with slack in the market expected to be absorbed slowly over time.<\/p>\n
The December 2025 jobs report points to a slow and choppy recovery, not a strong rebound. This reinforces our view that the Bank of Canada will likely keep interest rates on hold throughout 2026. For derivatives traders, this signals a period where selling volatility, rather than betting on big directional moves, could be the more prudent strategy.<\/p>\n
Given the Bank of Canada’s policy rate is holding firm at 4.50%, this gradual labour market cooling gives them little reason to act soon. We should consider strategies that benefit from stable short-term rates, like selling strangles on Bankers’ Acceptance futures (BAX) to collect premium from diminishing rate-hike fears. The market is now pricing in less than a 20% probability of a rate move before the third quarter, down significantly from late 2025.<\/p>\n
This steady outlook for interest rates suggests the Canadian dollar will struggle to find a clear direction against the US dollar. We have seen the USD\/CAD exchange rate remain in a tight channel between 1.3500 and 1.3750 for the past several weeks, and this report does nothing to change that. This environment is favorable for range-bound options strategies, such as iron condors, on the currency pair.<\/p>\n
For equity markets, the report is a mixed bag, removing the immediate threat of a sharp downturn but also capping the upside for the broader TSX index. The mention of stabilization in manufacturing and transport sectors, which were weak during the summer of 2025, may signal opportunities in industrial-focused derivatives. This is reminiscent of the market action in 2023, where cyclical sectors performed well during periods of economic uncertainty.<\/p>\n
The central bank’s main focus remains inflation, and a slowly loosening job market helps their cause. With the latest CPI data for December 2025 showing inflation at 2.8%, still above the 2% target, the Bank has justification to remain patient. This confirms our expectation that any potential rate hikes are a story for 2027, not for the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canada\u2019s labour market added 8,000 jobs in December; unemployment rose as more entered the workforce.<\/p>\n","protected":false},"author":62,"featured_media":17026,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38761","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38761","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38761"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38761\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17026"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38761"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38761"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38761"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}