Royce Mendes, head of macro strategy for Desjardins Group, talks to Financial Post’s Larysa Harapyn about the Bank of Canada‘s upcoming rate decision and how the central bank’s policy is not going to respond to weakness in home prices any time soon.

• Labour crunch looms for Canada, says RBC economist
• Americans are gaining interest in Canadian real estate

• Email: lharapyn@postmedia.com

The Canadian dollar on Monday slumped to a new closing low for 2026 of 71.67 cents U.S., with economists at National Bank of Canada singling out gold as “a key factor” behind the loonie’s weakness.

“The loonie has been the weakest reserve currency in recent weeks,” chief economist Stefane Marion and senior economist Kyle Dahms said in a report, referring to a group of currencies that include the United States dollar , euro and Japanese yen, among others.

They said one reason behind the Canadian dollar’s poor showing is that it now has a stronger relationship with the price of gold than the price of oil , which is a change from when the loonie and oil moved more in tandem during the previous oil shock of 2022 after Russia attacked Ukraine.

Gold is down 20 per cent from its all-time high of about US$5,400 an ounce.

“The rolling correlation between daily moves in the loonie and (West Texas Intermediate) has turned negative in recent months, a clear break from the strongly positive relationship that prevailed during the previous oil shock in 2022, while the correlation with bullion has strengthened sharply,” Marion and Dahms said.

After hitting a year-to-date high of 74.1 cents U.S. in late January, the Canadian dollar dropped about three per cent as investors fled to the U.S. dollar in search of shelter from the stock market rout brought on by the Iran conflict.

From early April to early June, the loonie recovered some of those losses, but has now given them all back.

Marion and Dahms said there are several other factors pushing down the Canadian dollar, including “deteriorating” economic growth and “unfavourable” interest rate spreads between two-year Government of Canada and U.S. Treasury yields.

The two-year U.S. Treasury has a yield of 4.2 per cent compared with the Government of Canada bonds’ 2.9 per cent.

Canada’s economy contracted in the first quarter following negative growth in the final quarter of last year, leading to talk of a technical recession, which is two consecutive quarters of negative gross domestic product (GDP).

The economists said the recession story is a bit of a hard sell given Canada added 88,000 positions in May and the unemployment rate dropped, according to Statistics Canada data released on June 5.

But U.S. real GDP is estimated to grow at 1.6 per cent, according to the U.S. Bureau of Economic Analysis, which would far outpace that of Canada.

Marion and Dahms expect the Canadian dollar to rise to 74 cents U.S. by year-end, but that will depend on a successful outcome to the review of the Canada-U.S.-Mexico Agreement.

“For now, we expect the Canadian dollar to remain under pressure,” they said. “Appreciation should resume, but a sustained rally will likely require Ottawa to secure a trade accord with the U.S. this summer.”

• Email: gmvsuhanic@postmedia.com

• Canada doesn’t need a digital loonie to maintain sovereignty from the U.S. — it needs digital competition
• Canadian dollar is being dumped from FX reserves at a record pace. What's going on?

Competition authorities in the United Kingdom are imposing new conduct requirements on Alphabet Inc. ’s Google that will allow publishers to keep their content from being used to power the tech giant’s artificial intelligence features.

In what the U.K.’s Competition and Markets Authority called a world first, publishers will be able to prevent their content from being used in Google’s AI features in search, such as AI Overviews, which quickly compiles information from various sources to boil down a complex topic into a couple of paragraphs.

In addition, Google will be required to ensure that any content used in AI‑generated search results is properly attributed to the publisher using clear links, something the competition authority said will also boost consumer trust.

Moreover, under the new conduct requirements, publishers will be able to opt out of allowing their content to be used for the “fine-tuning” of Google’s AI models.

“This provides publishers with confidence that they will have control over the full range of AI use-cases of their content,” the CMA said, adding that the new conduct requirements will put publishers in a stronger position to negotiate content deals directly with Google.

A Canadian media association hailed the new measures as a blueprint for other jurisdictions including Canada.

“This is a globally significant announcement,” said Paul Deegan, chief executive of News Media Canada, which represents hundreds of print and digital titles across the country including those owned by Financial Post parent company Postmedia Network Canada Corp.

“The U.K. has shown the world the way. Without a realistic opt out, publishers in Canada and around the world have been held for ransom by Google,” Deegan said.

A Google spokesperson responded to a request for comment about the U.K. competition authority’s new conduct requirements by sending a blog post published by the search giant on Wednesday.

In it, the company said it is actively listening to feedback from publishers and engaging with regulators such as the U.K.’s Competition and Markets Authority.

“Today, we’re beginning to test a new control that lets website owners manage how their links and content appear in generative AI Search features,” the post said, noting that the company plans to roll out new control features globally after testing them with a subset of website owners in the U.K.

“Sites that opt out will not receive traffic or impressions from our generative AI features,” the tech giant said, adding that this control will not be used as a ranking signal for search results outside of these generative AI Search features.

Deegan said the pledge to eventually offer opt-out controls to publishers around the world isn’t enough.

“We want the (Canadian) Competition Bureau to align with the CMA’s position to ensure Canadian publishers can effectively opt out from Google AI Overviews as well,” he said.

“Since Google launched AI Overviews in Canada in 2024, publishers have been harmed, and we need an immediate remedy. This should not take months to roll out, and there is no reason why this cannot be done in Canada concurrent (with) the U.K.”

Deegan said that rather than being forced to opt out, publishers should be given the option to opt in to AI training and other AI uses, putting control over content in the hands of publishers that own the copyright-protected content rather than Google, whose machines merely scrape and summarize it.

Anna Maiorino, a spokesperson for the Competition Bureau, said the Canadian agency is aware of the U.K.’s new conduct requirements for Google and follows the work of international counterparts closely, even though they operate under different legal regimes.

“I would emphasize that the Bureau does not develop laws or regulations on any market, sector or industry,” she said.

News Media Canada has been pressing the federal government to direct the Competition Bureau to conduct a market study into one of Google’s primary search tools, Googlebot, which Deegan contends makes it difficult for publishers to opt out of the AI components of Google’s platform.

“(It’s) a co-mingled bot for both traditional search and AI,” he said. “Essentially, if you block their AI crawler, you become undiscoverable on the web … essentially throwing yourself off the internet.”

A Google spokesperson said publishers are able to use a separate control called Google-Extended to opt out of having their content used for AI training.

“Google-Extended does not impact a site’s inclusion in Google Search nor is it used as a ranking signal in Google Search,” the spokesperson said.

Through federal government efforts, Canadian publishers have managed to get some compensation from Google as they struggle to reach audiences and generate revenue alongside global tech firms dominant in online search and advertising.

Under the federal Online News Act, passed in 2023, $100 million now flows to Canadian news businesses annually from Google, which Deegan said is working well. However, he noted that these funds aren’t coming in the form of content licensing agreements, which would see the tech firms pay directly for use of copyrighted material.

Obtaining compensation of any kind has been much more difficult when it comes to social media powerhouse Meta Platforms Inc. (formerly Facebook). In 2023, rather than comply with the incoming online news legislation, Meta withdrew the ability to share news in Canada on its Facebook and Instagram platforms.

In addition to government efforts, the Competition Bureau has been taking steps to deal with the online dominance of major international tech firms.

In November 2024, the Bureau took legal action against Google for alleged anti-competitive conduct in online web advertising in Canada, accusing the company of abusing its dominant position in advertising technology and the ad auction process by, among other things, taking negative margins in certain circumstances to disadvantage rivals and dictating the terms on which publishers could transact with rival ad tech tools.

In setting out its case, the Competition Bureau said it is seeking remedies including forcing Google to pay a penalty and sell two of its ad tech tools. The competition authority also wants to see the company prohibited from continuing to engage in anti-competitive practices. However, it will be up to the Competition Tribunal to determine whether there is merit to the case and whether any remedies are needed.

Similar cases are playing out in other jurisdictions, including in the United States, where Google lost a couple of key anti-trust cases involving online search and advertising.

• Canada’s new AI plan commits billions for AI adoption, new jobs and skills training
• Federal government confirms it has access to Anthropic's Mythos to test for critical software vulnerabilities

• Email: bshecter@nationalpost.com

This week, I will be heading down to Washington, D.C., to meet with American officials and launch our plan to build Fortress North America — a renewed partnership between Canada, the United States and Mexico anchored in the strength of the Canada-U.S. relationship and reinforced by our trilateral partnership with Mexico .

In every conversation I have with American politicians and business leaders, I make one thing clear: tariffs and uncertainty hurt workers, businesses and families in both our countries.

I have also been clear about something else. I love the United States. I respect the American entrepreneurial spirit. I believe deeply in what we can achieve together.

Ontario and Canada will always do what is necessary to stand up for and protect our workers and businesses. The best outcome for workers and businesses on both sides is ending uncertainty and working together to support jobs and economic growth.

As the United States approaches its 250th anniversary, this is a defining moment for our partnership. It is time to come together on a fair trade agreement that will create more jobs, lower costs and strengthen our economic and continental security in the face of growing global competition, especially from China.

Ontario is the economic engine of Canada and a critical partner to the United States. We are America’s closest ally and the largest customer for more than half of U.S. states. We supply the essentials that Americans rely on every day, including critical minerals and rare earths, electricity, uranium, manufacturing inputs, food and health products that support U.S. families, factories and defence industries.

Put simply, we build things together.

Ontario supports millions of American jobs and plays a vital role in the strength and security of our shared economy. There is nowhere else in the world where two economies are so deeply integrated. At the same time, this integration is amplified through North America’s trilateral trade framework, where strong Canada-U.S. ties help drive broader continental growth.

We have seen a constructive shift in Mexico’s approach to trade, including increased attention to issues such as transshipment and broader trade enforcement. We look forward to working alongside Mexico to build on this momentum and strengthen cooperation — because when our trade systems work as intended, it enhances the integrity and competitiveness of all North America.

That is why it is in all our shared interests to move forward together under a renewed Canada-U.S.-Mexico Agreement (CUSMA). A strengthened CUSMA will support shared prosperity and unlock the full potential of Fortress North America.

It will mean a jobs boom. With the right agreement in place, we can unlock billions in new investment across North American auto, steel, manufacturing, agriculture, energy and critical mineral supply chains.

It will lower the cost of living. By reducing tariffs and strengthening our integrated supply chains, we can lower costs for businesses and pass those savings on to consumers.

And it will strengthen continental security, because economic security is national security. By working together, we can build secure and resilient supply chains for critical minerals, nuclear energy, defence production and advanced technologies. We can protect our economies, our borders and our shared future from global threats.

At the same time, a stronger North American partnership will help limit the flow of unfair imports that distort markets and undermine our workers and industries. Deepening our alliance is essential to protecting our economic strength, our democratic values and our long‑term competitiveness.

Trade conflict between allies only creates uncertainty and that uncertainty benefits our competitors, not our workers. We must stay focused on unity, fairness and building together.

• Matthew Lau: How Doug Ford can get his popularity back
• Opinion: Doug Ford hands Donald Trump a trade weapon

Ontario is ready to do its part. From critical minerals and nuclear energy to advanced manufacturing and artificial intelligence, we are uniquely positioned to help power the next generation of North American growth and security.

Together, let’s build Fortress North America.

Doug Ford is the Premier of Ontario.

Housing development is increasingly running up against a basic blockage beneath the streets: water and sewer systems that can’t keep up with a city or town’s growth.

As a result, housing projects are delayed, fewer homes reach the market and the cost of new infrastructure construction is increasingly passed onto buyers and renters.

Economists, developers and municipal leaders say water and wastewater systems are increasingly limiting housing construction in parts of Canada as cities and towns struggle with aging infrastructure, rapid population growth and the cost of upgrades.

For example, Killam Apartment REIT, one of the country’s largest residential landlords, said it was pausing new developments in Halifax due in large part to water and wastewater infrastructure bottlenecks. The city is rolling out a multibillion-dollar infrastructure overhaul as it grapples with capacity constraints while working with the province to fast-track development approvals and address pressure on existing infrastructure.

The issue is not solely about zoning approvals or land availability. More than 11 per cent of Canada’s water and wastewater assets are in poor or very poor condition, according to Statistics Canada, with more than an estimated $100 billion in upgrades needed.

Housing economist Mike Moffatt said water and wastewater systems built decades ago are increasingly struggling to keep up with the level of growth now being planned — a challenge that is becoming a reality for more municipalities.

He said a few communities have reached hard limits on their infrastructure, but many more are approaching them as population growth accelerates.

“It is an issue,” he said, pointing to parts of eastern Ontario, the Kitchener-Waterloo, Ont., region and Greater Vancouver as areas where infrastructure pressures are emerging.

He said many municipalities could begin hitting capacity constraints within the next five to 15 years.

“When those limits are reached, governments will have very expensive, capital-intensive decisions to make,” he said.

The challenge can be especially stark in smaller communities.

Moffatt, founding director of the Missing Middle Initiative, said municipalities of roughly 10,000 people can face infrastructure upgrades costing $100 million to $200 million, an investment that can be difficult to justify without certainty that growth will actually materialize.

“That will be the tip of the iceberg,” he said.

The most visible cases involve projects being delayed because servicing is not available, he said, but the larger issue may be less visible: communities simply don’t open land for development at all because they know infrastructure cannot support it.

Developers say the issue is already shaping decisions on the ground.

Justin Sherwood, chief operating officer of the Building Industry and Land Development Association, said water and wastewater infrastructure constraints are appearing “virtually everywhere” in some form, particularly in fast-growing parts of Ontario.

“You can’t build a house if you can’t flush the toilet,” he said.

He pointed to the York region north of Toronto, where wastewater capacity constraints have left large housing developments stalled as developers await major infrastructure expansions. For example, he said thousands of planned homes in East Gwillimbury are effectively waiting for sewer capacity before construction can proceed.

Sherwood said the issue affects both new suburban developments and denser city projects. In some cases, developers must fund costly upgrades to local pipes before higher-density projects can move forward. In others, entire subdivisions are effectively paused until regional infrastructure is expanded.

Even in established cities such as Toronto, he said aging infrastructure can create constraints depending on location and system capacity.

“It’s up there,” he said, referring to the importance of servicing capacity among housing constraints in some regions. “In York, sewer allocation is right up there — top three, top four issues.”

The issue is not always that projects are formally rejected, Sherwood said, but that infrastructure capacity shapes what can realistically happen in the first place.

“In the instance of infill, usually the developer and municipality partner find ways to get adequate piping put in the ground,” he said. “But that adds cost to the new project.”

Sherwood said development charges in parts of the Greater Toronto Area can reach $130,000 to $140,000 per unit, much of it tied to the cost of water and wastewater infrastructure needed to support new housing.

Municipal leaders say those pressures are becoming more difficult to manage as infrastructure ages and population growth accelerates.

The result, said Rebecca Bligh, president of the Federation of Canadian Municipalities and a Vancouver city councillor, is that municipalities are increasingly limited on how quickly they can move on housing approvals.

“When it comes to water and wastewater infrastructure, it’s all about planning and forecasting for both new and renewal of existing infrastructure,” she said. “It is holding up municipalities’ ability to move quickly in terms of approvals when it comes to housing.”

Bligh said the challenge varies across the country. Smaller municipalities, she said, face disproportionate pressure due to limited tax bases and smaller administrative capacity, while larger cities are dealing with aging systems and rising demand.

She pointed to Toronto, where she said sewer infrastructure constraints have contributed to delays of more than 60,000 homes, and to London, Ont., where multi-year upgrades are required before further housing expansion can proceed.

Bligh said existing federal funding tools, including the $51-billion Build Communities Strong Fund, are important, but will need to move faster and more directly to keep pace with housing and infrastructure demands.

She said municipalities largely rely on property taxes and user fees for revenue, which account for roughly one-tenth of total government revenues in Canada despite them being responsible for a majority of core local infrastructure.

“We know what we need to do,” she said. “The concern is we don’t have the fiscal capacity to do it at the speed and scale that housing targets require.”

The issue is prompting renewed attention from senior levels of government. An $8.8-billion housing-enabling infrastructure fund announced by Ottawa and Ontario earlier this year is aimed at expanding water, wastewater and related servicing capacity needed for new housing.

The program is intended to help municipalities finance major infrastructure upgrades while reducing some of the upfront costs passed onto developers. But municipal leaders say the impact will depend on how quickly funding flows and whether it keeps pace with rapidly growing demand.

• Halifax is booming — but now it has Toronto problems
• Canada 'world's most attractive market for infrastructure investment', poll says

Even with new funding programs in place, Moffatt said the challenge is unlikely to disappear quickly. Many municipalities are approaching capacity limits, while the cost of expanding water and wastewater infrastructure continues to grow.

Sherwood said the issue goes beyond housing approvals and speaks to the broader role infrastructure plays in supporting municipalities.

“Why should people care about this issue?” he said. “It’s in everyone’s best interest that Canadian cities and towns have infrastructure that is modern and able to support the social and economic needs of a growing, vibrant country.”

• Email: arankin@postmedia.com

Canada’s jobless rate fell to 6.6 per cent in May as 88,000 positions were added into the economy, the first significant employment gain since November 2025, according to Statistics Canada’s labour force survey data released Friday.

Here’s what economists had to say about the latest data and what it means for the Bank of Canada’s future interest rate decisions.

‘Ends recession debate’: CPA Canada

The latest jobs numbers just about ends the recession debate, said Chartered Professional Accountants of Canada’s chief economist, David-Alexandre Brassard. The May report significantly beat expectations, bringing employment close to flat for 2026. The scale of job creation, particularly in full-time roles, points to improving economic conditions rather than a downturn, he said.

“This is a blockbuster report that seemingly wipes away recession fears and points to a rebound in the second quarter following two quarters of contraction,” said Brassard, noting that the gains were broad-based, driven by sectors outside the public sector and industries impacted by tariffs.

He said the report also shows easing wage pressure, as a surge of new jobs helps slow wage growth caused by earlier labour market tightness.

“That resilience comes as Canada looks ahead to the renewal of CUSMA,” he says. “We’re in a stronger position heading into these discussions, which is extremely important given ongoing global trade pressures.”

‘BoC to stay on sidelines next week’: TD Economics

TD Economics director and senior economist Andrew Hencic said the unemployment rate tumbling in May handily beat consensus expectations for a 10,000 gain, as employment gains outpaced labour supply. The labour force was little changed at 3,800, leaving the participation rate unchanged at 65 per cent.

“No bones about it, this is a solid report,” said Hencic. “However, this basically brings employment back to where it was in January, with an unemployment rate 0.1 percentage points higher.”

He said there continues to be a lot of noise in the Canadian economic data, including the “disappointing” surprise contraction in first quarter GDP. But with April’s flash GDP estimate signalling a 0.4 per cent monthly gain and now May’s labour force report, he continues to expect a second quarter bounce-back in activity.

He added that the economy is nonetheless operating below capacity, providing a disinflationary offset to the energy price shock. With this backdrop he expects the Bank of Canada to stay on the sidelines next week and keep its policy rate at 2.25 per cent.

‘Difficult to have much confidence’: Desjardins

Royce Mendes, Desjardins Economics managing director and head of macro strategy, was a bit more cautious. He said the labour market showed signs of life in May with a strong rebound in job creation, which largely reverses the losses observed earlier in the year and the level of employment now just shy of its December 2025 peak.

Yields across the Government of Canada curve are rising, led by the short end where traders are now pricing in between one and two rate hikes for the remainder of this year, he added.

“That said, given the volatility in the Labour Force Survey, it’s difficult to have much confidence in the signalling power of today’s reading,” said Mendes. “We continue to see downside risks for the Canadian economy both from fundamental weakness and trade negotiations.”

‘Welcome upside surprise but cautiously optimistic’: RBC Economics

Royal Bank of Canada assistant chief economist Nathan Janzen said May’s larger-than-expected increase in employment and drop in the unemployment rate is a welcome upside surprise, after the concerns around an unexpectedly soft GDP report for Q1 last week.

Still, the jump in employment in May was just the second increase in the last five months, he said, which still left the employment count slightly down year-to-date in 2026. He argued that a sharp slowing in population growth is distorting the historical comparison of employment growth, as around 26,000 workers retired per month over the last year, and caps on temporary resident arrivals are reducing the supply of workers available from abroad.

“Looking ahead, the economic growth backdrop still faces headwinds,” Jensen said, pointing to the trade uncertainty ahead of negotiations to extend CUSMA and higher energy prices cutting into household purchasing power. “But we remain cautiously optimistic that per-person economic growth and labour market conditions will continue to gradually improve this year, with the unemployment rate edging broadly lower,” he said.

‘The economy isn’t booming, but it isn’t falling apart, either’: BMO

Bank of Montreal’s managing director for Canadian rates and macro strategist, Benjamin Reitzes, said the employment surge in May should silence the recession crowd, with the economy hanging in there despite the headwinds from trade and energy prices.

“Just when you think Canada is crumbling amid a string of negative data points, things reverse,” Reitzes said. “We’ve seen this story a few times in the past year. The economy isn’t booming, but it isn’t falling apart, either.”

The May jobs data is “an unambiguously strong report… Canada continues to hold in,” he said, and it should somewhat ease Bank of Canada worries about the economy after the negative GDP print. Still, he said the back-to-back negative GDPs, lower oil and tame core CPI point to a less hawkish (Bank of Canada decision) next week than in April…though the shift will be less material than if the May report was weak.

‘Strength increases chance of rate hikes: Capital Economics

Capital Economics senior North American economist Ariane Curtis said the strength evident in Canada’s labour market increases the chance of rate hikes this year. She said the strong rebound in employment and the fall in the unemployment rate will provide some relief to the Bank of Canada that the economy is not in or on the verge of recession.

“While wage growth slowed, the strength in the labour market presents a risk to the view that the Bank of Canada will keep rates on hold this year,” she said.

‘Labour market watchers can breathe a sigh of relief’: Indeed Canada

Indeed Canada’s senior economist Brendon Bernard said May’s strong numbers are a good reminder of how a brewing trend in the labour force survey can reverse with just one data release. The slide in full-time job growth that started in February has reversed, and the 0.3-point drop in the unemployment rate almost brings it back to where it started the year.

However, this isn’t particularly good news, he said, as the challenges facing Canadian job seekers persist. The weak momentum that began the year was probably overstated, in part because the fourth quarter of 2025 was surprisingly strong, and now, he says, we’re back to baseline.

“Labour market watchers can breathe a sigh of relief. The employment situation showed a nice rebound in May, reversing a weak start to the year,” said Bernard. He noted that job postings on Indeed have been fairly steady over the past year, which suggests stable conditions in the broader labour market.

• Canada's unemployment rate drops to 6.6% as economy gains 88,000 jobs
• Matthew Lau: Keep out of Tim Hortons' hiring choices

‘Not the backdrop to even consider raising rates’: Rosenberg Research

David Watt of Rosenberg Research & Associates Inc. said that beyond the optimistic headlines, the economy is barely scraping by.

He said that most of the increase in full-time jobs came in the youth category, which jumped by 98,700 — a very rare occurence, and notable given the many stories about the employment challenges facing young Canadian workers. Watt doesn’t think those challenges are gone, and, given the saw-tooth pattern of data from the May report, expects the June jobs numbers might tell a different story.

“This is not the backdrop for a central bank to even consider raising rates,” he said. “Instead, it suggests keeping open the option that they might need to ease.”

Watt added that he thinks the sell-off in the two-year bond that lifted its yield to 2.90 per cent will be unwound as folks take a closer look at the report.

• Email: dpaglinawan@postmedia.com

Last time the Bank of Canada decided on interest rates , market expectations of hikes later this year shot up, as traders zeroed in on one word — “consecutive.”

Governor Tiff Macklem’s mention of the possibility of “consecutive” rate increases in one scenario where oil prices climb higher prompted markets to up their bets to 2.5 hikes this year after the April meeting.

Since then softer economic data and tamer inflation have lowered those bets to 1.5 hikes, but most economists still think the market is overshooting the mark.

“Canada is in a technical recession , and the labour market remains soft with net job losses year to date, keeping the bar for hikes high, said Bank of America economist Carlos Capistran.

“With inflation expectations likely to remain well anchored … we expect the BoC to stay on hold and recommend continuing to fade market pricing of BoC hikes.”

The Bank of Canada’s next decision is this Wednesday and the central bank is widely expected to leave the rate unchanged at 2.25 per cent, its fifth consecutive hold. It’s on the path for the rest of the year where economists and markets diverge.

Most of Canada’s big banks expect the central bank to keep the rate steady throughout this year, including Bank of Montreal, CIBC, Toronto Dominion and Royal Bank of Canada.

Bank of Nova Scotia, however, is forecasting 50 basis points of hikes in the fourth quarter of 2026 and another in early 2027, bringing the rate to 3 per cent.

“We’re the only shop in Canada that called the market move toward pricing hikes in 2026 forecasts dating back to last November,” said Derek Holt, head of Scotiabank Capital Markets Economics, in his note this morning.

Royce Mendes, head of macro strategy for Desjardins Group, however, argues the market is mispriced, saying all signs point to a “classic demand shortfall in the economy.”

In Desjardins’ view the data show that Bank of Canada no longer needs to be worried about a tradeoff between high inflation and low growth, and should focus on what is needed if demand deteriorates further.

The risk of the upcoming Canada-United-States-Mexico-Agreement review is “under-appreciated,” said Mendes, as a negative outcome is the “single greatest risk to the Canadian economy.”

It now looks likely that the three countries will not agree to a 16-year extension by the July 1 deadline — which while not a disaster, will extend the uncertainty hanging over the economy.

With no move expected from the Bank of Canada Wednesday, observers will be watching policy makers’ language closely.

Mendes said the bank should refrain from reiterating the need for “consecutive” rate increases, calling the last instance a “communications misstep.”

“Traders should beware that the Bank of Canada has a history of misguiding markets,” he said.

But Bank of America said “the BoC is biased to the hawkish side” and sees a risk of the market repricing in hikes after the bank’s press conference on the decision.

BMO Capital Markets strategist Benjamin Reitzes expects the Bank of Canada to take a more balanced tone this time around.

“It’s challenging to rationalize threatening consecutive hikes again given how the macro backdrop has evolved,” he said.

Sign up here to get Posthaste delivered straight to your inbox.

Where employed Canadians are working

More Canadians are returning to the office, as remote work continues to decline, Statistics Canada’s latest jobs data showed.

Canadians working outside the home rose to almost 79 per cent in May, up from 77 per cent in 2025 and 75 per cent in 2022.

Those working exclusively at home dropped a full percentage point from last year to 11 per cent and are now down 7 percentage points from May 2022, when almost 19 per cent of employed Canadians worked from home.

Hybrid work has stayed steady after rising from 6 per cent in May, 2022 to 10 per cent in May 2023.

• Apple Worldwide Developers Conference in Cupertino, California begins at 1 p.m.
• Earnings: The Campbell’s Company

• An attractive solution for aspiring homebuyers priced out of the market
  
• CBS’s firing of veteran journalist Scott Pelley boils down to one issue: who calls the shots?
  
• Should Peter put most of his 88-year-old dad’s money into a fixed-income fund?

Defined-benefit (DB) plans have become revered as gold-plated pension perks, something reserved for the likes of public servants and a shrinking number of lucky private sector workers. But as stock market returns have soared in recent years, defined-contribution pensions (DC) have been staging a comeback. The Financial Post’s Garry Marr explains why DC plan holders are seeing their accounts grow, while more conservative defined benefit plans are left behind. Read more

Interested in energy? The subscriber-only FP West: Energy Insider newsletter brings you exclusive reporting and in-depth analysis on one of the country’s most important sectors. Sign up here.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com .

• Brace for the coming labour squeeze as 25,500 Canadians retire every month
• Recession, what recession? Canada's economy is doing better than it has in years by this measure

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here

This week FP Video looks at what it takes to keep the pumps flowing at a local gas station in Alberta during a global energy crisis , whether the fortunes of Canada’s pipeline industry are at a turning point and why American citizens are flocking to Canadian real estate websites. Plus an economist fills us in on a possible labour crunch on the horizon as retirement numbers soar .

Running a gas station during an energy crisis

It might sound surprising, but this is not a good time for gas stations. When prices are high, it’s tougher to make a profit. So, how are they managing? Watch as FP Videos take you behind the counter at Gas King, a local station in Lethbridge, Alta., where fuel prices shape what people spend and how often they shop. Find out how this independent outfit keeps on truckin’.

Canada’s pipeline industry at a turning point?

Canada’s pipeline industry may be entering a new phase after years of delays and cancellations. South Bow’s proposed Prairie Connector line to the U.S., upgrades to Enbridge’s Mainline and possible Trans Mountain upgrades could add room for rising oil production. But industry insiders say timing will determine whether Canada avoids another pipeline crunch.

Americans’ interest in Canadian real estate is spiking

Phil Soper, president and chief executive at Royal LePage, talks to Financial Post’s Larysa Harapyn about why more Americans are scanning Canadian real estate sites during Donald Trump’s second term and how the real estate market is shaping up going into the summer.

Labour crunch looms for Canada

Nathan Janzen, assistant chief economist for Royal Bank of Canada, talks about the headwinds to come for the labour market as record numbers of Canadians retire.

• How 1.5 billion barrels of oil went up in smoke: FP Video explains
• Keystone XL pipeline rises from the grave and other oilpatch news

Canada’s unemployment rate fell to 6.6 per cent in May and the economy added 88,000 jobs , the first significant employment gain since November 2025.

The increase was driven by an addition of 154,000 full-time positions, according to data published by Statistics Canada on Friday. Part-time work declined, recording a loss of 66,000 positions.

The increase followed a net decline of 112,000 jobs over the first four months of the year, including a loss of 18,000 jobs in April that had nudged the unemployment rate up to 6.9 per cent.

Job gains were led by the construction industry, which added 27,000 jobs, as well as information, culture and recreation sector, which added 19,000 jobs. Transportation and warehousing saw gains of 19,000 jobs, while the accommodation and food services industry added 17,000 jobs.

May’s numbers defied economists’ expectations for a modest improvement at best.

“This is far beyond expectations,” said Sal Guatieri, a senior economist and director at Bank of Montreal Capital Markets. “We were expecting a very modest rebound in employment after three months of job losses out of the past four months.”

Guatieri said that while May’s job gains didn’t fully offset the losses to begin the year, they did make a “good dent” in the decline.

“It suggests that Canadian businesses might be adjusting to the tariffs and the recent spike in fuel costs,” he said. “It’s just one month of data, but it does suggest, tentatively, that Canadian businesses are making that adjustment, and it certainly suggests that Canada’s economy has a little more momentum and vitality than was previously thought.”

Claire Fan, a senior economist at the Royal Bank of Canada, called the results “a good surprise” but warned against reading too much into a single month’s data, noting that a slowdown in population growth may have distorted May’s numbers because it lowers the “breakeven employment” rate — the pace of job creation needed to prevent unemployment from rising. A RBC article in January said that, when taking into account that population growth is at a standstill and the aging population, Canada’s breakeven rate is slightly negative.

That said, she noted that the three-month average unemployment rate has been trending lower since the August and September 2025 peak, signs that the labour market is starting to stabilize.

The broad nature of the job growth was another positive sign. A lot of job growth over the past year has been driven by the health-care sector, and five industries outside of that sector posted higher job growth numbers in May.

“Again, we need to wait for June’s data to really confirm whether this is something that’s going to persist throughout the rest of the summer or the year, or if this is just some volatility in the data,” Fan noted.

She said RBC expect the unemployment rate to come down to around 6.3 per cent by the end of the year.

Both economists said the data will dampen concerns about a full-blown recession in Canada.

The C.D. Howe Institute’s Business Cycle Council, the authority on recessions in Canada, declared earlier Friday that it’s still too early to tell whether the economy is in a full-blown recession. Canada’s economic activity did not show pervasive decline and first-quarter decline was “of very low amplitude” compared to other recessions.

“We are seeing an upturn in activity now, as we saw with the May jobs report, and flash estimates for April’s GDP numbers did show a nice pop in economic activity. Our view is Canada will avoid a recession and will start to gain some momentum as the year progresses. We probably won’t see stronger activity, though, until the turn of the year, and then into next year,” Guatieri said.

• Ottawa's budget watchdog predicts Bank of Canada will hike interest rate to 2.75% in 2027
• Canada's business productivity falls for second straight quarter

The higher-than-expected unemployment numbers may not be enough to pull the Bank of Canada off the sidelines, however.

Andrew Grantham, executive director and senior economist at CIBC Capital Markets, said in an emailed note to clients that employment is still down year-to-date because of weakness earlier in the year and May’s unemployment rate is still higher than the recent low observed in January (6.5 per cent), which can still put downward pressure on inflation.

“Because of that we still think that the Bank of Canada will stay on hold this year, and further evidence of tightening within the labour market and an acceleration in core inflation would be needed for us to change that view,” the note read.

• Email: ptran@postmedia.com

Lululemon Athletica Inc. ’s share price slumped further on Friday after the company cut its outlook on “spikes” of negative public attention and product releases that fell short of expectations.

On a Thursday call with analysts, Lululemon interim co-chief executive and chief financial officer Meghan Frank said the company “faced a few headwinds and a moderating sales trend” toward the end of the first quarter, which ended May 3.

“First, we experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top line performance,” Frank said. “And second, not all of our product launches have met our expectations.

The Vancouver-based retailer recently settled a five-month proxy fight with its founder Chip Wilson , who left the company in 2015 and has frequently criticized the brand’s management, strategic direction and lack of product innovation for a decade after leaving the company. He launched a public campaign at the end of December to reshape its board of directors.

The two sides announced a cooperation agreement on May 27 that will see two of Wilson’s nominees join the board after Lululemon’s annual meeting in June. Wilson, who is no longer directly involved with the retailer but owns an 8.7 per cent stake, agreed not to publicly disparage Lululemon for 18 months.

Lululemon previously reported it spent US$5 million on expenses related to the proxy contest in 2025 and expected to incur more one-time costs this year.

“We are pleased that some of the recent distractions have been removed, and we remain sharply focused on returning the business to a position of strength in North America,” Frank said on the call with analysts.

Lululemon’s share price has shed more than 60 per cent of its value over the last year as the company weathered several other headwinds, including U.S. tariffs and the end of the de minimis duty-free shipping loophole; the departure of former CEO Calvin McDonald and slowing sales in North America.

Several product missteps and growing competition in the athleisure space added to its struggles. Frank said the company is continuing to work on shortening its product development timeline to respond to customer trends and restock best-selling styles faster.

On Thursday, the company reported first-quarter net revenue increased four per cent year over year to US$2.5 billion, coming in above analysts’ forecasts of US$2.4 billion.

Net income for the quarter was US$195 million, down from US$314 million a year ago. Diluted earnings per share were US$1.69, down from US$2.60 per share last year and just above analysts’ expectations of US$1.67 per share.

Based on the underperforming product launches and negative media commentary reducing customer traffic, Frank said second-quarter net revenue is expected to decline two per cent to three per cent to between US$2.45 billion to $2.475 billion.

Lululemon also downgraded its guidance for fiscal 2026 and said it now expects net revenue to decline between zero and one per cent to between US$11 billion and $11.15 billion.

Previously, the company forecasted full-year net revenue to grow two per cent to four per cent, in the range of US$11.35 billion and US$11.5 billion.

Net revenue in the Americas declined three per cent in the first quarter to US$1.6 billion. In North America, where Lululemon generates most of its sales, net revenue was down three per cent in Canada and four per cent in the United States.

Net revenue climbed 30 per cent to US$478 million in mainland China, which accounts for 19 per cent of Lululemon’s sales and is one of the retailer’s most important drivers of growth. Net revenue in the rest of the world was up 13 per cent to US$372 million.

Comparable sales, a key growth metric that includes net revenue from online sales and established stores that have been open for at least 12 months, increased one per cent.

Frank and chief commercial officer André Maestrini will soon wrap up their stint as interim co-chief executives. Lululemon’s incoming CEO, former Nike Inc. executive Heidi O’Neill , will start her new job in September during the company’s third quarter.

“André and I both spent time with Heidi,” Frank said. “It is clear to me she has a true passion for the Lululemon brand, a deep understanding of product excellence, extensive experience driving growth and transformation at scale, and will be a strong leader for our organization.”

The company’s stock fell more than 13 per cent in pre-market trading on Friday.

• Lululemon reaches agreement with founder Chip Wilson, ending proxy war
• Can incoming CEO Heidi O’Neill breathe new life into Lululemon brand?

• Email: jswitzer@postmedia.com