Canada's Labour Market Shows Persistent Weakness as 2026 Forecasts Remain Dim
Canada's economic performance has been notably lacklustre over the past several years, characterized by feeble GDP growth, declining per-person GDP, sluggish export activity, and alarmingly low levels of business investment. This broader economic stagnation is now manifesting clearly within the nation's job market, with recent data painting a concerning picture for workers and policymakers alike.
Key Labour Market Indicators Reveal a Cooling Economy
An examination of Statistics Canada figures for 2025 reveals several troubling trends:
- Job creation slowed significantly, with Canada recording approximately 21 million jobs in 2025—a mere 1.4% increase from the previous year. This pace marks a noticeable deceleration compared to the 2021-2024 period, indicating that the labour market has lost most of its earlier momentum.
- Unemployment numbers climbed steadily, with an average of 1.53 million Canadians unemployed in 2025, up from 1.40 million in 2024 and 1.10 million in 2022. Correspondingly, the unemployment rate averaged 6.8% in 2025, compared to 6.3% in 2024 and 5.4% the year before.
- Job vacancies declined markedly, with the job vacancy rate falling to 2.7% in the fall of 2025 from 3.1% a year earlier. This represents a substantial drop from the peak near 6% witnessed in mid-2021 during the post-pandemic hiring surge. The current lower vacancy rate signals both a less vibrant economy and diminished opportunities for workers seeking new positions.
Sectoral Analysis Reveals Mixed Employment Patterns
The employment landscape across different industries tells a story of uneven recovery and specific challenges:
Industries experiencing job losses in 2025 included:
- Agriculture and forestry
- Manufacturing
- Transportation and warehousing
- Business support services
- Mining and oil and gas production
- A catch-all "other services" category
Analysts attribute some of these declines to the confidence-sapping effects of U.S. President Donald Trump's global trade war and the tariffs his administration levied on several Canadian industries.
Conversely, net job gains occurred in several private sector industries from 2024 to 2025, including professional, scientific and technical services; construction; wholesale and retail trade; finance and insurance; accommodation and food services; information; culture and recreation; and utilities.
Government Sector Outpaces Private Employment Growth
A notable trend emerged in the public sector, where job growth continued to outpace that of the private sector. The three principal government sector industries—government administration, education, and health care and social assistance—all reported employment increases in 2025. Across the entire Canadian public sector, payroll jobs expanded by 1.9%, compared to a 1.3% increase in the private sector.
However, with Ottawa and many provincial governments now confronting sky-high deficits, economists question whether government-funded employment can maintain its recent brisk growth trajectory.
Forecast for 2026: More of the Same Mediocrity
If 2025 represented a mediocre year for job creation, most economic forecasters anticipate similar patterns will persist throughout 2026. With the Canadian economy expected to continue struggling on the heels of a lacklustre 2025, annual employment growth in 2026 is unlikely to surpass 1%.
This projection suggests that Canadian workers and job seekers should prepare for another year of challenging labour market conditions, with limited opportunities and continued economic uncertainty shaping the employment landscape.
Jock Finlayson is a senior fellow at the Fraser Institute.
