06:52 AM EDT, 06/10/2025 (MT Newswires) -- The back-up in Canada's jobless rate in May to 7.0%, while the U.S rate held fast at 4.2%, left the gap between the two

unemployment rates at a "whopping" 2.8 ppts, said Bank of Montreal (BMO).

That's the widest spread since early 2001 -- aside from one fluke month in the pandemic, noted the bank. Generally speaking, a wide gap in jobless rates is a good near-term leading indicator for the Canadian dollar (CADd or loonie) -- a weak relative economy begets an easier monetary

policy, which undercuts the currency.

That was working until recently, as the broader US dollar (USD) weakness is now dominating, stated BMO.

However, another factor to note is that the employment rate -- the share of those employed to the working age population -- tells a different story than the unemployment rate. Canada's employment ratio is still more than 1 ppt higher than the U.S. rate, reflecting the much higher participation rate in Canada, or 65.3% versus 62.4%, added the bank.

Notably, while Canada's employment rate has been sliding in the past two years, so has the U.S. rate, and the gap between the two is now identical to pre-pandemic levels.