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Labour Market Slack Continues to Build

Canadian Economics

By: Loubna Zebiri

    

In April, employment remained broadly stable, with a modest decline of 18,000 positions, while the employment rate edged down to 60.5 per cent. Meanwhile, the unemployment rate rose to 6.9 per cent due to increased labour force participation, which rose 0.1 percentage points to 65.0 per cent. Wage growth remained relatively resilient, with average hourly earnings rising 4.5 per cent on a year-over-year basis in April.

  • April’s employment decline was concentrated entirely in full-time work, which fell by 47,000, while part-time employment increased by 29,000 positions, providing a partial offset.
  • Over the first four months of 2026, the net employment loss was likewise driven by full-time positions, which declined by 111,000 jobs over that period.
  • On a monthly basis, employment declines in April were led by information, culture and recreation (–25,000), construction (–16,000), and other services (–13,000), which includes repair and maintenance as well as personal services.
  • However, these losses were partly offset by gains in business, building and other support services (+22,000), health care and social assistance (+18,000), and accommodation and food services (+13,000).
  • Provincially, employment was broadly unchanged across most regions, with Quebec recording a notable decline of 43,000 jobs in April and a cumulative loss of 87,000 positions between January and April.
  • In contrast, Ontario recorded its first meaningful employment gains of the year, adding 42,000 jobs over the month.
  • Despite the difficult start to the year for the labour market, total employment in April sat at 67,000 positions more than a year ago.
  • On a year-over-year basis, employment was broadly stable across most sectors, with the notable exception of health care and social assistance, which continued to lead gains, rising by 119,000 over the period.

Key insights

Business sentiment remains fragile, but conditions should improve. Canadian firms are likely to maintain a cautious stance over the next few months, weighing on overall employment gains across the economy. That said, we remain cautiously optimistic that geopolitical uncertainty—including trade policy and conflict in the Middle East—will ease throughout the year, supporting a more favourable investment environment. Business spending patterns will continue to favour productivity-enhancing initiatives such as automation and digitalization rather than labour-intensive expansion, a shift which may limit the pace of hiring. On net, however, we expect job gains to gradually improve throughout the year as firms continue balancing cost pressures and still-limited demand visibility with longer-term operational needs.

A gradual easing in labour supply growth is expected to support the ongoing rebalancing of labour market conditions. Demographic shifts will act as a structural constraint on labour force growth over the medium term. In the near term, softer labour supply conditions should help stabilize the labour market, offsetting cautious hiring intensions and sluggish economic momentum, limiting a sharper rise in unemployment. Over time, however, a broader economic recovery is expected to renew tightening pressures, as stronger labour demand increasingly meets a more constrained supply backdrop.

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