Canada’s labour market surprises on the upside, but questions linger beneath the surface

After months of cautious watching, Canada’s labour market finally showed signs of unexpected strength in October. Employment surged by roughly 67,000 positions, the unemployment rate edged down to 6.9 percent, and wages accelerated, a combination that suggests the labour slowdown that began in the spring may be easing, at least temporarily. The numbers are notoriously volatile, but the breadth of gains across provinces and sectors hints at something more than a statistical rebound.

Job creation was led by the private sector, reversing the softness seen in midsummer when U.S. tariffs had weighed on hiring in export-exposed industries. Manufacturing added around 9,000 jobs, transportation and warehousing gained 30,000, and retail and wholesale employment jumped by more than 40,000. These sectors, among the first to cut back when trade headwinds intensified, now appear to be stabilizing, perhaps benefiting from a mild rebound in global demand and the relative calm that followed the initial tariff shock.

Yet the recovery remains uneven. The bulk of October’s increase came from part-time positions, while full-time jobs declined by nearly 19,000 after a sharp rise in September. That mix speaks to employers’ hesitancy: many appear ready to ramp up operations again but remain wary of long-term commitments in an environment of slower growth and persistent uncertainty. Hours worked also slipped for a second consecutive month, partly because of temporary labour disputes, including a teachers’ strike in Alberta.

Wages, on the other hand, are moving in the opposite direction. Pay for permanent employees rose four percent year-over-year, up from 3.6 percent in September, while overall wage growth accelerated to 3.5 percent. The increase reflects a tightening balance between labour demand and supply. Population growth has slowed sharply from last year’s record pace, limiting the flow of new workers into the market. The labour force expanded by only about 17,000 in October, even as participation ticked higher. With fewer people entering, even moderate hiring is enough to pull the unemployment rate lower.

Provincially, the gains were broadly shared. Most regions saw declines in joblessness, with only British Columbia and Nova Scotia posting slight increases, and Alberta holding steady. Nationally, the unemployment rate remains 0.3 percentage points higher than a year ago, a reminder that the labour market is still softer than it was in late 2024 but October’s improvement marked the smallest annual increase in over a year.

The data also arrived at a delicate moment for monetary policy. The Bank of Canada, having reduced its overnight rate to the lower end of the neutral range in October, has signalled that further cuts would require clear signs of economic weakness. The October report delivered the opposite: job growth well above expectations, faster wage increases, and a higher participation rate. Together, they support the view that the central bank is likely to stay on hold through the winter, waiting for inflation and growth data to provide clearer direction.

For the broader economy, the implications are nuanced. Stronger employment in manufacturing and logistics suggests that some of the shock from tariffs and global trade friction has been absorbed. Rising wages could bolster consumer spending into the holidays but may also add pressure on employers already squeezed by higher costs. The persistence of part-time hiring and the modest decline in total hours worked point to a recovery still finding its footing rather than one racing ahead.

What does it mean for staffing firms?

Demand appears to be shifting back toward operational and trade-linked sectors, where the need for short-term or flexible labour remains strong. Firms in transportation, warehousing, and manufacturing are again seeking skilled workers, but often through temporary or project-based arrangements rather than permanent placements. The rebound in part-time work may signal that employers continue to value flexibility above all, a dynamic that could sustain demand for staffing services even as direct hiring slows.

The broader picture, however, remains one of constrained supply. Slower population growth and limited inflows of new workers mean that competition for talent is unlikely to ease. Wage pressures may persist, and staffing firms could find themselves operating in a market that rewards those who can match talent efficiently and at scale.

October’s labour report, then, offers a cautiously optimistic snapshot: a job market that has regained momentum but not yet balance. The rebound in hiring and wages shows resilience, while the tilt toward part-time and slower growth in hours worked reminds that fragility remains close at hand. If anything, the data capture the essence of the post-pandemic labour landscape; one defined less by steady cycles and more by oscillations between optimism and restraint.