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Mood Switch

Canadian Economics

By: Maxime Arseneau

    

Canada’s labour market is at a critical juncture, caught between short-term disruptions and long-term structural shifts. Employment gains in Canada grinded to a halt following 7 consecutive months of job growth. With economic uncertainty at its peak, labour markets will navigate challenges over the next few months. Beyond the immediate term, a major slowdown in population growth and an aging workforce will challenge job creation.

  • In March, employment in Canada declined by 0.2 per cent—a decrease of 33,000 jobs. The labour force participation rate declined to 65.2 per cent, while the unemployment rate rose to 6.7 per cent, up from 6.5 per cent in February.
  • In the goods-producing sectors, employment dropped in agriculture (–9,300), manufacturing (–7,100) and construction (–3,800).
  • In terms of the service sector, employment dropped the most in wholesale and retail trade (–28,500) and information and culture (–20,300). On a positive note, employment posted a healthy gain in professional services (+9,600) and finance, insurance, and real estate (+6,300).
  • Provincially, employment decreased in only 4 out of 10 provinces: Ontario, British Columbia, Quebec and Manitoba. In the other provinces, employment rose the most in Saskatchewan (+6,600).
  • On an annual basis, average hourly wage growth edged up to 3.6 per cent. Labour force remained stable in March (+3,500).

Insights

Despite the U.S. omitting Canada and Mexico from reciprocal tariffs on “Liberation Day,” Canada is still facing significant challenges as tariffs on steel and aluminum products and automobiles are in effect. Manufacturing jobs in those sectors will be at risk, with Stellantis already announcing a three week pause on operations at its Windsor plant. Consumers, too, are expected to feel the impact of the trade war, particularly with Canada’s retaliatory measures, including a newly announced duty on imported U.S. cars, matching those implemented by the U.S. administration. The trajectory of global trade remains highly uncertain, with global markets subject to Trump’s shifting stance.

Beyond these short-term disruptions, Canada’s labour market is facing deeper, long-term challenges. A slowdown in population growth, combined with a wave of retirements from the baby-boomer generation, will constrain the labour force over the next five years. The share of workers aged 55 and over has risen sharply over the past 25 years, from 10.4 per cent in 2000 to 21 per cent in 2024. While this ratio has been declining since 2020—partly due to an influx of young migrants and increased retirements—the rising number of retirements will pose growing challenges for many industries. Crucially, the construction sector is bracing for a surge of retirements over the next few years, which is particularly worrisome amid Canada’s ongoing housing shortage and bold plans by governments to boost supply. Without strategic measures to replenish the workforce, these initiatives will struggle to meet their goal.

Recent changes to immigration policy, which reduce migration targets through 2027, will further constrain the labour supply. Immigration, Refugees and Citizenship Canada (IRCC) projects 105,000 fewer permanent residency admissions in 2025, with additional reductions planned for 2026 and 2027. Canada also intends to lower the proportion of non-permanent residents to 5 per cent by 2027. As population growth continues to slow, labour market pressures will intensify, making it increasingly challenging for businesses to attract new workers.

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