Modest Job Growth Amidst Soft Labour Market Conditions

Canada’s job market showed a little bit of life in March after steep job losses in January and February. Employment rose by 14,100 in March (up 0.1 per cent). Meanwhile the labour force participation rate stayed the same at 64.9 per cent and the unemployment rate was also unchanged at 6.7 per cent. On a year-over-year basis, average hourly wages increased by 4.7 per cent.

Key insights

Canada’s labour markets struggled to regain momentum early in the year. After two consecutive monthly declines in January and February, March’s suggests Canada’s labour market has struggled to gain its footing this year. Employment in March remains below October levels and was up just 0.4 per cent on a year-over-year basis. Despite this, a labour force decline in recent months behind weaker population growth is keeping the unemployment rate moving on a downward trajectory.

Looking ahead, labour market performance is expected to remain volatile. While business and consumer confidence have recovered somewhat from last year’s lows, they remain below pre–trade war levels. In addition, the war in Iran is likely to place further strain on industries that are heavily dependent on energy as an input, such as transportation and agriculture. Higher oil prices will also constrain some household spending on non-essential goods, weighing on the retail, wholesale, and food services sectors. Much will depend on the duration of the conflict and whether upcoming negotiations prove successful. However, even if tensions have already peaked, we expect oil prices to remain elevated for the remainder of the year.

Demographic trends are providing some temporary relief. Canada’s population declined for two consecutive quarters in the second half of 2025—a historic first. This slower population growth has eased pressures at a time when labour markets are slowing. As workers exit the labour force, the unemployment rate has been prevented from rising more sharply amidst a cool economic backdrop. However, the slower labour force will become a challenge once economic growth picks up, as the unemployment rate could fall, while job vacancies could rise.