Labour Market Stuck in First Gear

In April, employment in Canada grew by 7,400 jobs. Meanwhile, the labour force participation rate edged up by 0.1 points to reach 65.3 per cent, while the unemployment rate rose to 6.9 per cent. On a year-over-year basis, average hourly wages grew by 3.4 per cent.

Key insights

April’s job report indicates that tariffs, or even the threat of them, is having some impact on the labour market. While employment rose slightly in April, that comes behind a large increase in temporary work related to the Federal election. Industries that face more pressure from tariffs, such as manufacturing, saw notable declines. The concentrated job losses show the impact that tariffs could have on other industries, if they are ever imposed more broadly on Canada.

Yet, Donald Trump’s tariffs have so far generated more fear than actual pain. But the persistent uncertainty surrounding future tariff measures continues to weigh on the economy. Confidence remains near record lows, and as a result, many consumers are expected to delay major purchases this year, concerned about potential job losses or deteriorating personal finances.

On the business front, tariffs are expected to continue weighing on the logging and manufacturing sectors, particularly in steel and aluminum production. Canadian agri-food exporters are also contending with new retaliatory tariffs from China on pork, aquatic products, and canola. Against the backdrop of an already volatile economic environment, these escalating trade tensions are likely to further discourage investment and hiring through the rest of 2025, with automotive and parts manufacturers expected to be among the hardest hit.

Looking ahead, Canada’s labour market will face added pressure from a major shift in migration policy over the next three years. In late 2024, the federal government announced a series of measures to lower immigration targets for the 2025–2027 period—marking a sharp departure from the high intake levels seen since 2021. As a result, population and labour force growth are expected to stagnate. This slowdown will be further exacerbated by a wave of retirements as the baby-boomer generation continues to leave the workforce, making it increasingly challenging for employers to attract and retain new talent.

An aging workforce and persistent skills shortages will continue to strain Canada’s labour supply, with far-reaching implications across various sectors. The proportion of workers aged 55 and older has more than doubled over the past 25 years—from 10.4 per cent in 2000 to 21 per cent in 2024. As this demographic increasingly exits the labour market, many industries will face mounting recruitment and retention challenges. The construction sector, in particular, is bracing for a significant wave of retirements at a time when Canada is contending with a severe housing shortage and governments are pursuing ambitious plans to boost supply. Without targeted strategies to attract and develop new talent, these initiatives risk falling short of their goals.