The Weekly Bottom Line
Our summary of recent economic events and what to expect in the weeks ahead.
Date Published: November 7, 2025
- Category:
- Canada
Canadian Highlights
- Surprising forecasters, Canada gained 67k jobs in October and wages accelerated. The healthy jobs print could give a shot in the arm to consumer spending in the fourth quarter.
- Canada’s federal budget was heavy on spending commitments and will leave Canada with larger deficits. Still, given ongoing uncertainty, more will need to be done to stimulate investment.
- The solid jobs report and stimulative budget have all but eliminated the chance of a near-term BoC cut.
U.S. Highlights
- The U.S. government shutdown officially became the longest in history, passing the 35-day record set in 2019 on Wednesday.
- The dearth of official data has us looking to alternative indicators which point to some further cooling in the labor market.
- Other data show that consumer confidence has weakened since January and has fallen to near-record lows this month.
There was plenty for markets to digest this week, with a jobs report and of, course, the federal government’s massively hyped budget (see our analysis of the latter here).
Surprising consensus forecasts yet again, Canada’s job market delivered a solid performance last month, with 67k jobs gained (Chart 1). This marked the second straight sizeable monthly increase, and, together with September’s gain, erased declines observed in July and August. What’s more, the unemployment rate dipped 0.2 percentage points, average hourly wage growth accelerated, and even U.S.-levered industries like manufacturing and transportation/warehousing saw job growth. Of course, it’s rarely the case that we get a jobs report where all aspects point in one direction. This time, the fly in the ointment was that gains were concentrated in part-time positions. Also, hours worked were down 0.2% month-on-month due to labour disputes, which will weigh on output in October. Still, this was a healthy print, which could help support consumption at a time when the economy needs a boost.
At long last, the federal government delivered its budget this week. Billed as a blueprint that would transform the Canadian economy, we have a few key takeaways. Deficits are here to say (Chart 2). This year’s shortfall is pegged at 2.5% of GDP, an unusually large deficit for Canada. However, Canada still stacks up well in relation to other G-7 countries, and it’s the same story for the country’s debt burden, even with net debt-to-GDP forecast to climb above 43% over the projection horizon. Markets didn’t seem overly worried about Canada’s fiscal deterioration, with bond yields effectively unchanged in the wake of the budget and the Canadian dollar down only a smidge. The decision to split the budget balance into capital and operating balances did little except provide a fiscal anchor (i.e. balancing the operating budget by FY 2028/29).
Deficits reflect heavy spending commitments on personal tax relief, defense, housing, corporate tax incentives and infrastructure. Some savings offsets are penciled in on workforce reductions and operational efficiencies. This is a sea change from the prior government, which focused on income support or “affordability” measures for different sectors and populations. In a speech this week, Bank of Canada Governor Macklem agreed with this sentiment.
Infrastructure spending and tax initiatives do change the calculus for firms considering investments, but given uncertainty, this budget alone likely won’t be enough to get companies off the sidelines, especially as Canada’s regulatory burden is left largely unaddressed. Also, much will depend on the execution and uptake of the policies set out in the fiscal blueprint.
For the Bank of Canada, the stimulative aspects of the federal budget, coupled with a solid jobs report, have dealt a serious blow to the odds of follow up rate cuts. Markets have effectively priced-out a move in December. We would agree and see the central bank leaving its policy rate unchanged through next year.
The current shutdown of the U.S. government became the longest in history this week, entering its 36th day on Wednesday. The outlook for resolving the shutdown is as murky as ever. While new compromises are being floated, confidence from lawmakers seems low. Pressure will build as constituents have to tolerate travel delays, cuts in food aid, and other more visible signs of the shutdown the longer it goes on. Just as cloudy is the picture of how the economy has been evolving since August, the last month covered by official statistics for most measures.
The dearth of federal government data has us looking to other indicators to assess the state of the economy. The preliminary November reading for the Michigan Survey of Consumer Sentiment showed consumer confidence sliding for a fourth consecutive month – reaching a three-year low. Most of the pullback was due to a further decline in consumers’ perception of current economic conditions, which fell to the lowest level on record (dating back to early 1980’s). The survey also showed that inflation expectations remained elevated at 4.7%. Moreover, only 37% of surveyed households think that “now is a good time to purchase large household goods” – the lowest level since 2022 when the Fed first started to raise its policy rate. And this negative sentiment appears to be spilling over to the hard data, with vehicle sales falling to a 17-month low of 15.3 million in October.
The ISM monthly surveys of firms in the manufacturing and service sector are usually helpful indicators of the direction of the economy. Across both sectors, employment remains in contractionary territory, but encouragingly, has been declining at a slower rate. Meanwhile, price growth remains elevated, particularly in the services sector (Chart 1), which complicates the interest rate outlook, especially given the firming in inflation expectations in the Michigan Survey.
Outside of the ISM’s, we also received several other alternative private sector readings on the labor market. ADP estimates of private payrolls rose 42k in October – a modest pick-up from September where job growth contracted by 29k – bringing the three-month moving average to a meager 3k per-month. Meanwhile, Challenger job cuts surged to 153k last month – a six-month high. The Chicago Fed’s estimate of the unemployment rate ticked a touch higher to 4.4% for October. But encouragingly, state-level jobless claims remain low and relatively stable (Chart 2). Federal Reserve Governor Lisa Cook noted this week that hiring is slowing according to job posting data.
While this slew of indicators is mixed, with some showing more weakness than others, the overall message is that the job market is probably hanging in a state of semi-stasis, what we have been calling “low hire, low fire”. As we turn the page on this week, the big question still in our heads is how long we will be looking at the economy through this clouded, half-closed lens – and for that, we will need to see if there is any hope of the government shutdown resolving soon.
Disclaimer
This report is provided by TD Economics. It is for informational and educational purposes only as of the date of writing, and may not be appropriate for other purposes. The views and opinions expressed may change at any time based on market or other conditions and may not come to pass. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. This report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise the TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.
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