Canada’s job market just lost one of its biggest crutches: public sector hiring. After years of driving job growth—expanding at twice the pace of the private sector—the public workforce abruptly contracted in May. New data from Statistics Canada’s Labour Force Survey (LFS) shows a sharp pullback, raising questions about recent job gains. While the hiring boom is often credited to federal policymakers, the lion’s share of public sector employees work for municipal governments.
Canada’s Public Sector Shrank By 21k Jobs Last Month
Canadians employed in the public sector.
Source: Statistics Canada; Better Dwelling.
Canada’s public sector employment fell 0.5% (-21.3k jobs) to 4.53 million workers in May. This wasn’t just a seasonal skew—it was the largest drop since 2011. The public sector is still up 1.96% (+87.1k jobs) from last year, but this was the slowest pace of hiring since mid-2023 (excluding the single-month blip in October 2024).
Part of this decline was due to temporary Elections Canada work. However, this number is still smaller than February 2025, implying there’s a little more to the pullback.
Canadian Public Sector’s Share of Employment Shrinks Sharply
As a result of the contraction, public employment as a share of total employees made a sharp pullback. The share fell 0.17 points to 24.8% in May, marking the largest monthly drop since 2022. It’s still up 0.15 points from last year, but slowing this down can mean a big shift for the country’s labour force.
Canada has relied on public job creation to bolster a tepid job market in recent years. Between January 2020 and May 2025, public sector jobs grew significantly faster than private—about 2.5x faster, to be more precise. This helped public sector jobs gain nearly 2 percentage points of the total employment share. Now 1 in 4 people with a boss work for the government.
Federal Government’s Firing Spree Not The Only Factor
The Federal government isn’t the only public employer on a firing spree. The LFS doesn’t specify which level of government public workers are employed, but we can cross-reference the Treasury Department data. The federal government and its agencies employed 357,965 people in its latest annual disclosure in March. This was a decline of 2.7% (-9.8k jobs) from a year prior, and the first contraction in a decade. The department stated it planned to cut 5,000 jobs, but it appears to have already eliminated twice that number.
Some may have noticed the federal government and its agencies only account for fewer than 1 in 13 public sector jobs. The vast majority of the 4.5 million public sector workers are employed by lower level governments:
- Provincial and territorial governments that include healthcare workers (in hospitals or public health units), provincial ministries and its units, education (K-12), etc.
- Municipal governments that include city staff, fire departments, and public works; and
- Public institutions and Crown corporations—such as public universities and colleges, Canada Post, CBC, etc.
The lion’s share of public sector employment has been municipal governments, which represent roughly a third of the total. Municipal governments expanded rapidly post-2021, particularly in planning, public safety, and IT roles.
Canada’s recently elected prime minister has pledged to taper spending—implying a reduction in public sector employees. But trimming the federal workforce may not deliver the shift many anticipate, whether they support or oppose the scale of public employment. That’s because the largest segment of this sector is lower levels of government—municipal, in particular. Unless those segments are addressed, federal cuts may prove more symbolic than structural.