The Canadian labour market has undergone significant shifts over the past several months, shaped by slowing economic activity, increasing public sector reliance, and softening wage growth. While job creation has continued, underlying trends behind these employment gains raise concerns.
Job Growth and Sectoral Disparities
The composition of new jobs has been heavily skewed toward the public sector and older workers, according to reports from Edge Realty Analytics. In November 2024, employment rose by 51,000 month over month, per the Labour Force Survey (LFS), but 80% of these jobs were in the public sector. Similarly, in December 2024, Canada saw its strongest job growth in two years, adding 91,000 positions, but 40,000 of these were public sector roles, and two-thirds of the total gains were among workers over 55.
The January 2025 Labour Force Survey (LFS) showed another strong increase of 76,000 jobs month over month, marking a second consecutive month of substantial gains.
Unemployment Rates
In November 2024, the unemployment rate rose 0.3 percentage points to 6.8%, marking a three-year high (or an eight-year high if excluding pandemic-related distortions). By January 2025, the unemployment rate had edged down slightly to 6.6%, but regional disparities were stark. Toronto and Vancouver recorded their highest non-pandemic unemployment rates in over a decade, pointing to worsening labour conditions in Canada’s largest urban centres.
Additionally, long-term unemployment rose. As of October 2024, the number of workers unemployed for six months or longer had doubled compared to Q3 2024, and the ranks of those jobless for a full year had reached levels only seen during recessions, according to Edge Realty.
Wage Growth Slowing
After a period of strong wage gains, growth in earnings has slowed considerably. In November 2024, year-over-year wage growth for permanent workers fell to 3.9%, down from 4.9% the previous month. This deceleration continued into December 2024, with wages rising just 3.7% year-over-year, the slowest pace since April 2022.
By February 2025, wage growth had dropped further to 3.5%, marking the weakest rate since April 2022, and on a six-month basis, it stood at just 1.3%, the weakest since late 2021. The decline in earnings growth, combined with rising living costs, has contributed to financial strain for many households.
Dissatisfied Quitters
At the same time, the number of dissatisfied quitters, or workers leaving jobs due to dissatisfaction, has dropped. In November 2024, this figure fell 17% year-over-year, the largest annual decline since mid-2021. By February 2025, the decline deepened to 21% year-over-year, indicating that workers may be more reluctant to leave jobs due to deteriorating job market conditions.
Divergence in Employment Surveys
Edge Realty Analytics reports also emphasize the importance of being aware that different employment surveys can send mixed signals about the state of the labour market. The payroll survey (SEPH) is based on actual payroll remittance data, which offers a concrete measure of employment as reported by employers. In contrast, the household survey (LFS) relies on phone interviews with individuals and may sometimes report higher job growth than actually occurs.