Navigating trade volatility: labour force dynamics in trade-dependent industries
The stability of the Canadian labour market is increasingly tethered to the complexities of cross-border trade, as highlighted in a recent Statistics Canada report titled “Recent employment trends in industries dependent on U.S. demand.” The analysis tracks the ripple effects of shifting trade policies and tariff uncertainties on payroll employment, revealing a distinct divergence between industries tied closely to U.S. exports and those focused on domestic or broader international markets. While total payroll employment remained largely stagnant through much of 2025, the underlying movements within trade-dependent sectors suggest a cautious and defensive posture among employers.
According to the report, industries where at least 35% of jobs depend on U.S. demand experienced a notable 1.4% decline in payroll employment between late 2024 and mid-2025. This downturn was most visible in goods-producing sectors such as transportation equipment, chemicals, and primary metal manufacturing. For instance, motor vehicle parts manufacturers saw a significant contraction, shedding thousands of positions as trade tensions escalated. In contrast, sectors less reliant on U.S. demand—including health care, education, and public administration—saw modest growth, acting as a stabilizing force for the aggregate economy even as the industrial heartland faced headwinds.
A critical finding in the research is the mechanism behind these shrinking payrolls. Surprisingly, the decline in employment within trade-dependent industries has not been primarily driven by a surge in layoffs. Instead, the data points to a substantial slowdown in hiring. The national layoff rate remained consistent with historical norms, hovering around 0.6%, suggesting that firms are opting for "labour hoarding" or natural attrition rather than mass terminations. Many employers appear to view layoffs as a last resort, choosing instead to pause recruitment and leave vacancies unfilled to navigate the period of uncertainty. This trend is further evidenced by a decline in the transition rate from unemployment to employment, which dropped significantly compared to pre-pandemic averages.
The staffing and recruitment industry must interpret these trends as a shift toward a "wait-and-see" economy. The reduction in hiring velocity in the manufacturing and chemical sectors suggests that while the demand for production may be under pressure, the core workforce remains largely intact. This creates a unique challenge for talent acquisition professionals, as the pool of active job seekers grows while the number of available high-quality openings in the industrial sector tightens. The data suggests that candidates who are currently unemployed are remaining in that state longer, indicating a mismatch between the current supply of labour and the cautious demand from trade-exposed employers.
Ultimately, the report underscores the vulnerability of the Canadian labour market to external policy shifts. As trade tensions influence non-residential investment and hiring intentions, the resilience of the workforce will depend on the ability of non-trade-dependent sectors to absorb surplus labour and the capacity of industrial firms to resume hiring once trade clarity returns. For now, the Canadian labour landscape is characterized by a strategic pause in the trade-dependent corridor, where the preservation of existing roles has taken precedence over the creation of new ones.