- In May, employment in Canada was virtually unchanged, rising by just 8,800 jobs. The labour force participation rate held steady at 65.3 per cent, while the unemployment rate increased to 7.0 per cent. On a year-over-year basis, average hourly wages grew by 3.4 per cent.
- Employment in goods-producing industries declined across most sectors, with the largest losses in manufacturing (-12,200) and construction (-7,400). In contrast, the services sector added 21,800 jobs, led by notable gains in wholesale and retail trade (+42,800), information services (+19,300), and financial services (+12,400). However, these gains were partially offset by significant losses in public administration (-32,200), as temporary election-related positions came to an end. Employment also declined in accommodation and food services (-16,400), as well as transportation and warehousing (-15,500).
- At the provincial level, employment increased in British Columbia (+13,300), Nova Scotia (+11,000), and New Brunswick (+7,600). In contrast, it declined in Quebec (-17,000), Manitoba (-5,800), and Prince Edward Island (-2,700). Employment levels in the remaining provinces were largely unchanged from April.
Key Insights
May’s labour market survey results continued the same trend observed in April, as the sporadic imposition—and threat—of tariffs was enough to stall employment growth. The volatile nature of U.S. trade policy is directly affecting businesses’ ability to plan their hiring and investment over the medium term. Our Index of Business Confidence fell to its lowest level on record outside of the pandemic last month, with 54 per cent of surveyed firms expecting to cut capital spending in the country over the next six months. With new tariffs on steel and aluminum taking effect this week, we anticipate continued weakness in the manufacturing sector, as well as in other industries sensitive to current economic uncertainty, such as transportation, warehousing, and construction.
The outlook for Canada’s labour market beyond 2025 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. On the supply side, steep cuts to immigration and a net outflow of temporary residents from Canada will result in a dramatic slowdown in labour force growth, putting downward pressure on the unemployment rate.
These labour market pressures will be felt most acutely in sectors where demand is set to rise sharply. Canada’s aging population will drive increased demand for healthcare and social assistance—sectors already facing persistently high job vacancy rates. Meeting this growing need will require both an expanded workforce and substantial capital investment to enhance service capacity. However, this pressure is increasingly at odds with the federal government’s new immigration policies and the fiscal constraints confronting provincial governments. With labour force growth expected to stall, employment gains in the healthcare sector may be limited. As recent provincial budgets indicate, many governments plan to slow the pace of healthcare spending in the coming years as they work to restore fiscal balance.
Beyond healthcare, the construction industry is under growing strain, facing its own demographic headwinds and capacity constraints. A significant wave of retirements looms just as Canada grapples with a severe housing shortage and governments roll out ambitious plans to ramp up supply. Without targeted efforts to recruit and train new workers, these initiatives risk falling short of their objectives.
Read our Index of Business Confidence where we capture the views of senior executives at private Canadian corporations and provides important guidance for Canadian financial policy-makers.
