Recalibrating the Canadian labour market’s breakeven

The Canadian labour market is currently undergoing a fundamental transformation that challenges historical benchmarks for economic health. According to a recent analysis by RBC Economics, the primary driver of this shift is a dramatic rise in the "breakeven" employment level, the number of new jobs the economy must create each month simply to keep the unemployment rate stable. While a monthly gain of 15,000 to 20,000 jobs was once considered sufficient to maintain equilibrium, record-breaking population growth has recalibrated this threshold to approximately 50,000.  

This shift creates a paradoxical environment for the staffing industry and the broader economy. Recent data indicates that even when the economy adds a substantial number of jobs, the unemployment rate can continue to climb. This occurs because the expansion of the labour force, fueled largely by an influx of temporary residents and immigrants, is outstripping the pace of hiring. The traditional interpretation of job growth figures now requires a different lens; a "strong" month of hiring by historical standards may actually represent a loosening of the labour market if it fails to meet the new, higher breakeven requirement.

The surge in labour supply is most visible in the growth of the working-age population, which has recently expanded at its fastest rate in decades. This influx provides a significant pool of potential talent for employers, yet it arrives at a time when labour demand is cooling. High interest rates and a broader economic slowdown have led many businesses to pull back on recruitment efforts. Consequently, the vacancy rate has fallen from its post-pandemic peaks, and the time required to fill open positions has begun to normalize. For staffing professionals, this signals a transition from a period of acute candidate scarcity to one defined by a surplus of available workers relative to available roles.

The impact of this recalibration is particularly evident among younger workers and newcomers to Canada. As the breakeven point remains high, those entering the workforce for the first time face increased competition. The unemployment rate for these cohorts has risen more sharply than for established workers, suggesting that the "first-in, last-out" dynamic is being replaced by a "last-in, hard-to-start" reality. Employers are becoming more selective, and the urgency to hire that characterized the immediate post-pandemic era has dissipated in many sectors.  

Looking ahead, the trajectory of the Canadian labour market will depend on whether job creation can accelerate to match the pace of population growth or if population growth itself begins to moderate. Policy changes regarding temporary resident targets suggest a potential cooling of labour supply in the coming years, which could eventually bring the breakeven employment level back toward historical norms. While the job creation rate needed was close to 50,000 to 60,000 during the last years, this rate could sit at 20,000 in 2026 and become potentially negative in 2027, suggesting that even if jobs are not created as an aggregate, the unemployment rate would not go up. Until that alignment occurs, however, the staffing sector must navigate a landscape where headline job gains no longer tell the full story of market tightness. The focus has shifted from finding any available worker to identifying the right fit within an increasingly crowded and competitive talent pool.