Canada’s job market is worse than it looks, according to one of Canada’s largest banks. National Bank of Canada (NBF) is warning investors the surprising growth in payroll data has been misread as strength, but zooming out reveals it’s now aligning with the weakness observed in the Labour Force Survey (LFS). When combined with plunging job vacancies and a broad weakness across industries, the risk is much greater than initial data implies.
The latest Canadian payroll data was stronger than expected, but it should be viewed in context. Canada added 21k payroll employees in July, according to the latest Statistics Canada (StatCan) SEPH data. Any growth sounds great in the middle of a trade war, but the bank urges people to zoom out—SEPH barely budged throughout 2025, and is now converging with the LFS after months of divergence.
“… as we always caution, Canadian data are volatile which makes it difficult to draw reliable conclusions from a single data point,” explains Taylor Schleich, an economist at NBF.
Canada’s Converging Job Measures Leave Little Doubt About The Stall
Canadian employment growth: 6-month moving average (SEPH and LFS).
Source: StatCan; NBF.
The above chart provided by NBF shows the six month average for the SEPH was previously weaker than the LFS. Recent softness now has both stalling, and the alignment leaves few doubts on the labor market’s stall. Risks around eroding employment data are further amplified by the lack of cushioning for the nouveau unemployed.
Canadians Face Weakest Non-Pandemic Job Market In Nearly A Decade
Canada and US job vacancy/opening rate, with pre-pandemic averages.
Source: StatCan; NBF.
Canada‘s job vacancy rate has been steadily grinding lower, making it harder to exit unemployment. StatCan data shows the job vacancy rate fell to 2.6% in July, down from 3.1% a year prior and 5.6% back in 2022. Canada’s vacancy rate is now well below its 2018-2019 average, while US demand is roughly where it was pre-pandemic. The bank emphasizes Canada’s job vacancies have declined much more sharply than the U.S.—indicating underperformance from the broader global economy, and a more painful recovery.
Canada’s Emerging Risk: More Canadians Competing For Fewer Jobs
Ratio of unemployed Canadians to vacant jobs.
Source: StatCan; NBF.
Canada’s population growth may be slowing, but it remains robust enough to amplify the lack of jobs. The country has seen job vacancies fall 12% year-to-date (YTD), but managed to add over 157,000 people as of Q3 2025. There’s much more competition for fewer jobs.
“Looked at another way, there were 3.3 unemployed Canadians fighting for each vacant position in July. Outside of COVID, things haven’t looked this dire since early 2017, when the national jobless rate was also around 7%,” explains Schleich.
He further explains this time around is also very different from 2017. Back then the market was improving, whereas today it’s eroding. Monetary policy was also much more accommodating back then, as rates were in the stimulus territory. Today the BoC’s overnight rate is neutral, “more or less.”
Canadian Job Vacancies Fell Across The Board—Not Just A Trade Issue
Y/Y percent change in job vacancies by industry.
Source: StatCan; NBF.
Canadian employment weakness is largely positioned as a trade related-issue. Considering the Bank of Canada (BoC) recently explained the labour weakness is isolated to trade-exposed industries, it’s not hard to see where that came from. However, NBF warns the data doesn’t agree with the BoC take.
As the chart above shows, the job losses were across segments. It’s true that goods-producing industries are down 18% from last year, but services are also down 14% over the same period. With professional services, admin, real estate, and even finance hit—NBF calls the “resilient” narrative from the BoC into question.
“A 14% Y/Y drop in services sector openings doesn’t warrant the ‘resilient’ label,” quips Schleich.
NBF tells investors this warrants further easing much sooner than the January cuts priced in by markets. They believe the cut should be moved up to October, as the urgency for credit cushioning is much greater than anticipated.