The Shrinking Workforce Is No Longer a Forecast

Canada's labour force participation rate has fallen to its lowest level since 1997, and both Statistics Canada and the Bank of Canada now point to the same cause. Staffing firms are about to work in a market that is slack today and short of people tomorrow.

In the same week, two of Canada's most important economic institutions delivered the same message. On Oct. 8, the Bank of Canada published an explainer on how demographic change is reshaping the economy. Its summary was blunt: "Our workforce is shrinking." The next day, Statistics Canada's Labour Force Survey put a number on it.

The participation rate, the share of Canadians aged 15 and older who are working or looking for work, fell to 64.8 percent in September. Outside of the pandemic year of 2020, that is the lowest level since December 1997. Statistics Canada attributed most of the year-over-year decline to population aging.

Fewer people, older people

The Bank's explainer lays out the arithmetic. For most of the past 50 years, Canada's population grew about 1.2 percent a year. In the early 2020s, record immigration pushed that rate as high as 3 percent. In 2025 it slowed to 0.5 percent, the weakest growth in more than a century.

Two forces are behind the slowdown. The birth rate has been below replacement for more than 50 years, and immigration, which long filled the gap, is now declining. The federal government began reducing immigration levels in 2024, many temporary residents are leaving, and fewer new immigrants will arrive in the coming years, according to the Bank.

The population is aging at the same time. Canada's median age was about 26 in 1971; it is now over 40. Statistics Canada's figures show the shift inside the labour market itself: people aged 65 and older made up 23.2 percent of the working-age population in September, up from 20.5 percent in September 2019 and 14.8 percent at the turn of the millennium. The surge in immigration paused that trend in 2023 and 2024. It resumed in 2025.

Not a story about people quitting

The distinction matters for anyone interpreting the decline. Statistics Canada ran the numbers holding the population's age mix at its September 2019 level. On that basis, participation in September 2026 would be little changed from a year earlier and 0.2 percentage points higher than before the pandemic.

In other words, Canadians of any given age are not dropping out. There are simply more Canadians at ages when people stop working. That makes the decline structural, and it will not reverse when the economy recovers.

Slack now, scarcity later

For staffing firms, this creates an unusual tension. The cyclical picture is soft. Employment fell by 68,000 in September, and only 30.6 percent of unemployed people found work within a month, well below the pre-pandemic average of 36.5 percent. Candidates are plentiful in most categories.

The structural picture runs the other way. Statistics Canada's July vacancy data show the ratio of unemployed people to job openings improving mainly because there were fewer unemployed people, not because employers posted more jobs. RBC Economics has tied that shrinkage to retirements and lower immigration. As the cycle turns, a smaller pool will meet returning demand, and the scarcity that defined 2022 could return faster than many firms expect.