- In February, employment in Canada was largely unchanged, with a modest increase of 1,100 jobs. The labour force participation rate declined to 65.3 per cent, while the unemployment rate remained steady at 6.6 per cent.
- In the goods-producing sectors, employment dropped across all industries (-19,500), with the most significant decrease observed in utilities (-7,800). In contrast, the service sector saw job gains, primarily in wholesale and retail trade (+50,800) and finance, insurance, real estate, rental, and leasing (+15,600). However, professional, scientific, and technical services (-32,900) and transportation and warehousing (-23,000) experienced the largest declines.
- Provincially, employment increased in only 2 out of 10 provinces: Ontario (+16,900) and Manitoba (+900). In the other provinces, employment fell most sharply in Atlantic Canada and British Columbia, while it remained stable in Quebec, Saskatchewan, and Alberta.
- On an annual basis, average hourly wage growth edged up to 3.8 per cent. The survey also highlighted that the labour force expanded by just 0.1 per cent in February (+97,000), a growth rate less than half of the monthly average from 2024.
Insights
Canada’s labour market encountered significant challenges in 2024, characterized by a gradual slowdown. Employment rose by just 1.6 per cent — well below the rate of population growth. Nevertheless, job gains have been positive over the past seven months, and employment growth began to regain momentum in November. While this reversal is a welcome sign for the Canadian economy, potential risks loom from prospective U.S. tariffs that could hinder progress. Just yesterday, Canada narrowly avoided a second wave of tariffs on goods listed under the Canada-U.S.-Mexico Trade Agreement, securing a temporary reprieve until April 2. However, if imposed, these tariffs could severely impact the labour market. According to our latest analysis, temporary three-month tariffs would lead to a loss of 136,770 jobs in Canada and drive the unemployment rate up to 6.9 per cent while the tariffs are in place.
Even if the tariffs do not materialize, the ongoing uncertainty is harmful to both consumer and business confidence. In February, our Index of Consumer Confidence dropped by 12.1 points to 52.6 — the largest decline in over a year to a level comparable to what was observed during the pandemic. This decrease is primarily attributed to trade-related tensions south of the border. As a result, consumers are likely to reduce spending, fearing that their financial situation may deteriorate or that job losses could rise in the coming months. Similarly, we expect business confidence to weaken further. It has remained generally low since mid-2023, and the persistent threats from the U.S. are likely to curb some industries’ willingness to expand operations or hire additional workers, leading them to adopt a wait-and-see approach instead.
The outlook for Canada’s labour market in the coming years will be strongly influenced by forthcoming changes to immigration policy, which are expected to cause a sharp slowdown in population growth starting in 2025. Consequently, we anticipate a rapid tightening of the labour market, further intensified by a projected surge in retirements as baby boomers continue to leave the workforce through 2030. With fewer new workers entering the labour force, employers will increasingly need to rely on the existing pool of unemployed workers to fill job vacancies, something that is likely to push wages up and hurt the overall pace of hiring.
