Winners and losers from the labour market (increasing) volatility
Labour market analysis - July 2025
Canada’s job market once again defied expectations in June, adding 83,000 jobs — a figure that speaks to the surprising resilience of the country’s economy despite ongoing concerns over trade tensions, manufacturing slowdowns, and sticky inflation. The unemployment rate fell to 6.9%, reversing some of the softening seen earlier this spring.
Yet while the headline numbers suggest strength, the deeper story is more nuanced. The labour market is not weakening as a whole, but it is becoming increasingly divided. Ontario’s trade-exposed regions are bleeding jobs, while services, healthcare, and professional sectors elsewhere continue to hire at pace. The labour market is not collapsing, but evolving very differently depending where you are looking at.
Ontario accounts for more than 60% of the rise in Canada’s unemployment over the past year. Cities like Windsor (11.2% unemployment), Peterborough (10%), Oshawa (9.3%), and even Toronto (8.7%) are seeing jobless rates climb well above the national average.
The root cause? Manufacturing weakness.
Ontario’s manufacturing sector alone has shed roughly 45,000 jobs since January, a reflection of soft U.S. demand, supply chain frictions, and heightened trade volatility. This downturn isn’t limited to auto parts — it spans machinery, chemicals, and sectors intertwined with cross-border supply chains.
Quebec’s manufacturing hubs face similar, though somewhat softer, headwinds. British Columbia, for its part, remains steadier, with job losses more tied to the end of infrastructure booms and a cooling real estate sector than to global trade.
What’s driving the national gains?
The wholesale trade sector added about 34,000 jobs making it the largest gains in the economy, as companies are accelerating hires to restock warehouses. Those roles, mainly part-time, come as the pre-tariff rush to stock up from the earlier part of the year ended a few months ago, leaving stocks increasingly depleted as we approach the third quarter of the year.
Beyond that, the strength lies squarely in the service economy. June’s job creation was otherwise powered by roles in healthcare, professional services, education, and public administration — sectors less exposed to global trade turbulence and more responsive to domestic demand and demographic shifts.
Atlantic Canada, typically a laggard in job creation, is quietly outperforming. Provinces like Nova Scotia and New Brunswick now boast unemployment rates below the national average, buoyed by healthcare hiring, public sector growth, and steady demand in professional services. It’s a rare bright spot for regions long accustomed to being on the wrong side of national labour market trends.
In the Prairies, Saskatchewan’s unemployment rate fell to 4.9%, and smaller centres like Lethbridge and Red Deer in Alberta continue to show strong hiring momentum, supported by agriculture, energy, and local services.
Growing disparities
June’s strong overall numbers don’t erase the growing disparities by age and demographics. According to the Labour Force Survey, workers aged 45 and over account for 40% of the rise in unemployment over the past year. These workers are overrepresented in industries facing structural declines: manufacturing, construction, and resource extraction.
In contrast, workers aged 25-34 remain in demand, benefiting from expansion in professional roles and adaptability to fast-growing sectors.
There’s also a clear split between Canadian-born workers and immigrants. Despite headlines about challenges for newcomers, recent immigrants have seen their unemployment rates decline year-over-year. In contrast, Canadian-born workers account for 60% of the national rise in recent joblessness — a sign of deeper structural shifts in which younger, urban, and more mobile populations (often newcomers) adapt more readily to changing labour market demands.
Even with June’s gains, the labour market is not without vulnerabilities. Long-term unemployment is quietly ticking higher, up 5% over the past quarter. Many laid-off workers in trade-exposed industries are taking longer to find reemployment, particularly in regions with fewer growth sectors.
Wages continue to outpace inflation modestly, with average hourly earnings up 3.6% year-over-year. Participation rates remain high, including a notable uptick among older workers, some of whom are rejoining the workforce amid cost-of-living pressures.
What next for staffing firms and employers?
For staffing firms, these dynamics reinforce the importance of regional and sector-specific strategies. Healthcare, education, and professional services remain areas of opportunity, while recruitment tied to goods production and trade remains subdued.
Employers in struggling sectors face growing pressure to invest in retraining and mobility programs, especially as older workers make up a larger share of the unemployed. At the same time, service industries are contending with persistent competition for skilled talent, particularly in healthcare and tech-adjacent fields.
For the Bank of Canada, the picture remains mixed. Inflation is (somewhat) easing but remains sticky in some sectors, and wage pressures persist. While June’s robust job numbers reduce the urgency for rate cuts, the growing disparities between sectors and regions are likely to weigh on monetary policy decisions in the months ahead.
For now, the overall picture remains positive. But the fault lines exposed by trade tensions, demographic shifts, and uneven sector performance suggest that Canada’s labour market story in the second half of 2025 will be less about growth, and more about managing divergence.