Canada’s labour market in flux: a 3-month view and the road ahead
Labour force survey - August 2025
As Statistics Canada released its August labour figures on September 5, the headlines delivered a jarring blow: Canada shed a net 66,000 jobs, pushing the unemployment rate to 7.1 percent, its highest point in nearly a decade outside the pandemic. But to understand where the economy may be heading, the story must be told not just in August but across the arc of the past three months.
A Tale of Three Months: From Hope to Hesitation
In June, the economy appeared to awaken from a slumber. Employment jumped by 83,000 positions, the first substantial gain since January, bringing the unemployment rate down to 6.9 percent. Behind the headline numbers lay sectors such as wholesale and retail (+33,600), manufacturing (+10,000), and healthcare (+17,000), signaling a renewed momentum coming into summer. The labour force participation rate ticked upward to 65.4 percent, and average wages for permanent employees grew by 3.2 percent year over year.
But July came as a sobering correction. The economy lost 41,000 jobs, particularly in youth employment and industries affected by U.S. tariffs: manufacturing, information, recreation, and others. Despite this, the unemployment rate held firm at 6.9 percent . Analysts considered this pullback a recalibration after June’s unexpectedly strong numbers, noting the uneven sectoral impacts .
August deepened the shift: 65,500 jobs were lost, mostly in part-time work, dragging the unemployment rate to 7.1 percent. The services sector bore the brunt for once: professional, scientific, transportation, and warehousing roles all declined, while the goods sector managed a slight gain largely in construction.
Hiring Intentions vs. Realities: The CSJ Hiring Index
Amid rising unemployment, the CSJ Hiring Index, a barometer of hiring appetite, tells a subtler story. In July, it stood at 5.4 out of 10, suggesting hiring intentions were stabilizing but lacked momentum for broad-based acceleration. Despite this, the Conference Board’s Hiring Index crept upward in August, rising 3 percentage points, yet without translating into actual employment gains. This divergence (rising job postings but sinking job counts) hints at employers’ cautious approach: positions may be advertised but not filled.
What’s Next? Looking Toward the Six-Month Horizon
With this uneven trio of monthly readings, bounce, dip, slide, what might we expect in the coming half-year?
Construction: That sector’s resilience in August may hint at a steadier foundation for growth. If infrastructure projects and housing investments continue or scale up, this area could provide a buffer.
Manufacturing Recovery or Retreat: Manufacturing’s rebound in June suggests latent capacity. But tariff pressures and global demand will be key determinants. If supply chains recalibrate, there could be moderate improvement; if not, this sector may stall again.
Youth Employment & Targeted Hiring Initiatives: Persistent weakness among young workers remains alarming. Programs like Canada Summer Jobs (CSJ) offered up to 76,000 positions this summer, providing short-term relief, but sustainable youth employment hinges on school-to-work transitions and broader demand.
Hiring Momentum via Online Postings: The CSJ Hiring Index suggests that while intentions to hire are not collapsing, they’re not firm either. If job postings continue rising, that may pave the way for employment gains in service and administrative sectors.
Monetary Policy Tailwinds: Markets are pricing in a potential Bank of Canada rate cut by mid-September, a move that, if enacted, could stimulate investment and hiring across industries.
The Broader Picture: Challenges with Glimmers of Promise
It’s no longer just about the bleakness of job losses but about the divergence between intent and outcome. Employers are signaling readiness to hire, yet economic headwinds and caution persist in holding back actual job creation. Certain sectors such as construction, selective manufacturing, or health services may lead localized rebounding, while youth employment remains a critical weak point demanding policy attention.
If monetary easing arrives as expected, and if hiring intentions convert to action, the final quarter of 2025 could bring stabilization or even modest gains. Yet the landscape remains unsettled; Canada’s labour market teeters between fragility and recovery, charting a path defined as much by hesitation as by potential.