Canadian job growth flatlines in 2025 on trade war, population slowdown

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Canada’s job growth stalled in 2025 as key sectors of the economy, such as manufacturing, were hit hard by the trade war, weakening labour demand and prompting employers to shelve hiring plans.

The number of employees nationwide receiving pay and benefits from an employer fell by 28,300 or 0.2 per cent last year, Statistics Canada reported on Thursday. Ontario, which bore the brunt of job cuts in manufacturing, registered a decline of 45,000 or 0.6 per cent in 2025.

The manufacturing, warehousing and auto sectors have been especially affected by U.S. tariffs, with companies cutting production plans and embarking on layoffs as they manage cost pressures. Roughly 37,000 manufacturing jobs were lost in 2025, according to Thursday’s report.

At the same time, Canada’s population has started to decline because of major immigration policy changes that are aimed at reducing the number of temporary residents in the country.

In tandem, the trade war and population slowdown are both playing a role in Canada’s sluggish job market, said Brendon Bernard, senior economist at the job search site Indeed Canada.

“Both supply and demand factors are driving the flatlining of job growth in 2025. The direct effects of the trade war and now the plateauing of the population is going to mean a soft overall economy,” he said.

Statscan’s payroll data has become an increasingly important tool in tracking the country’s employment situation, Mr. Bernard said, because it provides detailed industry information.

A number of factors have been weighing on the Canadian job market in the last year, even as the unemployment rate remained relatively unchanged, going from 6.7 per cent to 6.5 per cent between January, 2025, and January, 2026.

First, the uncertainty of the trade war has made employers more skittish in increasing the sizes of their workforces. There are also early signs that AI technology is beginning to disrupt the white-collar work force, particularly in occupations such as software engineering and web design. Bank of Canada Governor Tiff Macklem recently said early data suggested that AI is reducing the number of entry-level jobs in Canada.

Canada sheds 25,000 jobs to start 2026 on manufacturing, Ontario weakness

Petro Antunes, chief economist at the non-profit Signal49 Research, formerly known as the Conference Board of Canada, said 2025 wasn’t a good year for the economy due to trade uncertainty and the manufacturing sector taking a hit.

“But I am increasingly concerned about tech disruption, and whether the service side of the economy – jobs like computer system design, accounting services – will start slacking,” he said. “Service jobs had been supporting a lot of job growth in previous years, especially in Ontario.”

The national job vacancy rate – a measure of the number of vacant positions as a proportion of total demand for labour – was the lowest since March, 2025, at 2.9 per cent, according to Statscan. In December, there were 514,600 vacant positions, and on a year-over-year basis, job vacancies were down by 20,500 or 3.8 per cent. Job postings surged to historic highs during the pandemic (peaking at more than one million jobs in the second quarter of 2022), but have since declined to prepandemic levels.

Certain sectors, however, like food and accommodation, perpetually struggle to fill job vacancies. Indeed’s Mr. Bernard predicts that the decline in the temporary resident population could increase the job vacancy rate in this sector, because a disproportionate number of temporary foreign workers and international students are employed in the food and hospitality sectors.

“It’s one area I’m looking out for because we will see more international students leaving as permits expire,” he said.

Job vacancies in the sector increased by 18.9 per cent (or 10,600 positions) in December compared to November, the first monthly increase the sector since the fall of 2023.