- Kari Norman
Economist
Economic News
Canada: Little Changed in the Labour Market in May Despite the Trade War
June 6, 2025
Highlights
- Total Canadian employment rose slightly in May 2025, adding 8.8k jobs, surprising economic forecasters who anticipated a decline of 10k. The unemployment rate moved up a tick to 7.0%, reaching a level last seen in September 2016, other than during the pandemic.
- Total hours worked were up 0.9% month-over-month in May, following similar growth in April, and were up 1.1% compared to the previous year. Average hourly wage growth increased 3.4% y/y in May. Table 1 summarizes the key data points.
- Our tracking is for real GDP to be essentially unchanged in Q2 2025, albeit subject to downside risk.
Implications
The Canadian labour market posted a modest gain of 8.8k jobs in May, but employment remains below the all-time high reached in February of this year. Employment in private services led the move higher in the month. Indeed, 2025 has been a growth year in the finance, insurance and real estate sector, accounting for more than 85% of net new jobs. In contrast, deteriorating business confidence in the wake of tariff and trade uncertainties has softened labour demand in the goods sector, notably in manufacturing and transportation. Ontario jobs were little changed in the month despite the hit from auto layoffs and temporary closures in May. Windsor and Oshawa experienced the highest rates of unemployment across Canada’s largest cities, at 10.8% and 9.1% respectively. At the same time, the public sector gave back 32k jobs following the completion of April’s federal election, meaning the gains in the month were all in the private sector.
The unemployment rate increased across youth (ages 15 to 24 years) and prime aged workers (ages 25 to 54 years) in May. Youth unemployment reached 14.2%, as they head into the important summer job market (graph 1). Employment among returning students in the accommodation and food services sector fell by 22% year-over-year, hinting that “vacation in Canada” promotions may not be offsetting households’ financial concerns amid the ongoing trade war. Labour market conditions are weakening more broadly. Long-term unemployment continued to rise, with 1 in 4 prime aged job searchers experiencing at least 6 months of unemployment (graph 2). Permanent layoffs ticked up, albeit remaining below recessionary levels.
Average wage growth continued to soften, holding at 3.4% year-over-year in May, down from a peak of over 5% through most of 2024 (graph 3). Wages advanced at the slowest pace in three years in May, and are expected to remain subdued throughout 2025 as labour demand weakens.
Canada remains in trade war purgatory, benefiting from CUSMA exemptions on “Liberation Day” but facing higher tariffs on aluminum and steel as of June 4. The Bank of Canada held rates steady External link. earlier this week, noting that the economy is slowing but waiting for clarity on US trade policy. Desjardins Economic Studies maintains our outlook for additional cuts totalling 75 basis points over the course of 2025.