🇨🇦 Banks are Making Billions & Unemployment Tumbles to 6.5%
The Week Everything Changed: Jobs Boom & Bank Earnings Anchor the TSX
The volatility returned to the markets this week, as the S&P/TSX Composite Index pulled back slightly from its recent high, closing the week at 31,311.41 on Friday, December 5th.
This minor retreat came amid a week driven by two massive data releases (the start of bank earnings season and a surprisingly strong jobs report) which forced the market to fully reset its expectations for 2026.
Here is a daily look at the drivers and the major economic developments:
📅 The Daily Market Flow
Monday, Dec 1: TSX futures dipped as investors showed caution and awaited the start of the major bank earnings season, the most significant domestic corporate event of the month.
Tuesday, Dec 2: Futures held steady as the market processed the first major result. Scotiabank reported stronger-than-expected Q4 results, posting full-year net income of $7.76 billion.
Wednesday, Dec 3: TSX futures were buoyed by positive initial bank results, primarily from Royal Bank of Canada (RBC) and National Bank of Canada. Rising oil prices also provided a significant lift to the heavily weighted Energy sector, further boosting the Canadian stock market.
Thursday, Dec 4: Strong bank earnings helped lift the TSX to a new record high. Major lenders TD Bank, CIBC, and Bank of Montreal (BMO) all reported, confirming the sector's solid health.
Friday, Dec 5: The TSX ended lower after the release of the stronger-than-expected Canadian jobs report. Equity markets reacted negatively to the immediate repricing of interest rate expectations, as the data lessened the probability of a Bank of Canada rate cut.
🇨🇦 ECONOMIC SHOCK: Jobs Defy Expectations & Interest Rate Outlook
Friday’s release of the November Labour Force Survey (LFS) (aka. Unemployment Report) was the biggest economic shock of the week, forcing markets to immediately reset their interest rate expectations.
The Big Headline: The economy added a massive 54,000 new jobs, crushing analyst expectations for flat growth. The unemployment rate dropped sharply to 6.5% (down from 6.9%), marking the lowest rate in 16 months and completely defying forecasts that it would rise to 7.0%.
The Catch: Cautious Growth: While the job market is active, the gains were driven by cautious business hiring:
Part-Time: Employment soared by 63,000 jobs.
Full-Time: This category actually saw a small decrease for the month.
i.e. Businesses are adding jobs, but they’re cautious, preferring flexible, part-time roles over long-term, full-time commitments.
BoC Outlook: The strength was enough to confirm the economy is not in a recession, which all but ends the Bank of Canada’s rate-cutting cyclefor the foreseeable future. However, the weak underlying quality of the jobs added shows the economy is still balancing on a tightrope.
💰 FINANCIAL VERDICT: Earnings, M&A, & Structural Shifts
1. Bank Earnings: Q4 Strength & Dividend Hikes
The Financial sector, which accounts for over a third of the TSX, provided a strong anchor with all six giants reporting:
Bank of Nova Scotia (Scotiabank) - (Reported Dec 2): Reported Q4 adjusted earnings per share (EPS) of $1.93, beating consensus. The bank showed strength in its Global Wealth Management and Capital Marketssegments.
Royal Bank of Canada (RBC) - (Reported Dec 3): RBC delivered a stellar performance, reporting full-year net income of $20.4 billion. It signalled confidence with a 6% quarterly dividend hike to $1.64 per share.
National Bank of Canada (NA) - (Reported Dec 3): NA beat expectations with adjusted EPS of $2.82 and announced a 7% dividend increase. Results were driven by strong growth in Capital Markets and the ongoing successful integration of its major acquisitions.
TD Bank Group (TD) - (Reported Dec 4): Reported adjusted net income of $3.9 billion, an increase of 22% year-over-year, driven by robust fee and trading income in its markets-driven businesses.
CIBC (CM) - (Reported Dec 4): CIBC saw impressive net income growth of 16% for the quarter, largely fuelled by a 40% increase in its Capital Markets segment, demonstrating strong momentum.
Bank of Montreal (BMO) - (Reported Dec 4): BMO reported adjusted EPS of $3.28 (up 73% year-over-year) and declared a dividend hike, stating the quarter delivered "robust earnings growth."
2. Sector Consolidation: Major M&A Signals Structural Shifts
Amid the earnings rush, two massive M&A deals were announced, underscoring the intense pressure on smaller players in the Canadian banking sector:
EQ Bank Acquires PC Financial: EQB Inc. announced it is acquiringPresident's Choice Bank (PC Financial) from Loblaw for approximately $800 million. This deal, which requires regulatory approval, gives EQ Bank the exclusive, 12-year partnership to offer financial products to the 17 million-member PC Optimum loyalty program.
Laurentian Bank Split & Sold: The 175-year-old Laurentian Bank of Canada agreed to be split and sold for approximately $1.9 billion. Its commercial operations went to Fairstone Bank, while the retail, SME, and syndicated loan portfolios were acquired by National Bank of Canada, further consolidating the Quebec market.
🚨 Next Up: The Bank of Canada
The next major event is the Bank of Canada Interest Rate Announcement on Wednesday, December 10th. Following the stronger jobs report, the BoC is universally expected to hold its overnight rate at 2.25%.
The market will focus entirely on the accompanying statement for any commentary on the Jobs Shock and its outlook for rate cuts in 2026.
In summary, the week of December 1st confirmed that the Canadian economy is resilient, underpinned by a surprisingly strong labour market and a robust banking sector.
The biggest question remains how long this resilience can last before the high cost of debt bites the consumer…