Job Seekers Left in the Cold as Unemployment Rate Climbs: What’s Next?
- In November, Canada experienced a moderate surge in employment, adding 51,000 jobs, primarily in the full-time and public sectors. The labour force participation rate climbed by 0.3 percentage points as more individuals entered the job market. However, this influx of jobseekers pushed the unemployment rate up by 0.3 percentage points to 6.8%, marking the highest level since January 2017 (excluding the pandemic years).
- Among the goods-producing sectors, construction flourished with an addition of 18,400 jobs. However, manufacturing faced a significant drop, losing 28,500 jobs. On the brighter side, the service economy thrived, especially in wholesale and retail trade, which added 38,700 jobs. Other sectors like professional scientific and technical services (+17,400), educational services (+15,400), and accommodation and food services (+15,300) also saw notable gains, balancing out declines in transportation and warehousing (-18,500).
- Across Canada, job growth was evident in four out of ten provinces. Alberta led the charge with 24,000 new jobs (+1.0%), followed by Quebec (+22,000; +0.5%), Manitoba (+6,600; +0.9%), and Prince Edward Island (+2,700; +2.9%). Other provinces showed little change in employment levels.
- On an annual scale, the average hourly wage growth eased to 4.1%. The report highlighted a worrying trend: long-term unemployment, defined as those out of work for 27 weeks or more, has risen to 21.7% of all workers—an increase of 5.9% from last year.
Key Insights
As we venture into 2024, Canada’s labour market is showing signs of cooling, struggling to keep pace with the burgeoning labor force. The unemployment rate is expected to average 6.3% in 2024, surpassing the averages of 5.3% and 5.4% seen in 2022 and 2023, respectively. While battling inflation, a trade-off has emerged: lower demand for labor and a rising jobless rate. Looking ahead to 2025, we anticipate a sharp slowdown in labor force growth due to decreased international migration, tightening the job market. As these supply constraints reemerge, Canada’s unemployment rate might reverse its current trend, especially in sectors heavily reliant on temporary residents, where job vacancies are predicted to rise.
Post re-election, President Trump has made waves by threatening to impose trade tariffs on Canadian exports crossing the southern border. This potential move, coupled with any retaliatory actions from the Canadian government, could spell trouble for Canada’s economy, which is heavily intertwined with trade relations with the U.S. While the details of the U.S. trade policy under the new Trump administration remain uncertain, early signs are raising concerns among businesses and consumers alike. We could see job losses in export-driven sectors as companies grapple with the fallout. Furthermore, a weakened Canadian dollar could spike import costs, contributing to inflation and diminishing consumer purchasing power—ultimately casting a shadow over several domestic industries reliant on employment growth.
With over a million temporary resident permits set to expire in 2025, the government is set to embark on a three-year mission to reduce the number of temporary residents in Canada.
Meeting this ambitious target could require a net outflow of roughly 900,000 temporary residents over the next two years. Achieving this will demand substantial resources for monitoring and enforcing visa rules and labor regulations. Additionally, cuts to permanent resident targets will complicate matters for temporary residents seeking to transition to permanent status. As the wave of temporary visa expirations rises, and the path to permanent residency narrows, the number of individuals without status in Canada may increase, potentially fueling undocumented employment in the underground economy. Employers in sectors like accommodation and food services and retail, which rely on Canada’s temporary resident workforce, will likely face renewed hiring challenges and must adapt their recruitment and retention strategies.
For a deeper dive into Trump’s tariff threats and what they mean for Canada, stay tuned for our latest insights.
