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Economic News

Canada: Labour Market Wobbles as Tariff Pressures Mount

April 4, 2025
Laura Gu
Senior Economist

Highlights

  • The Canadian labour market showed early signs of softening in March amid trade turmoil, with 33k jobs lost in the month, falling short of expectations of a 10k rebound. A continued decline in labour participation kept the unemployment rate relatively stable, inching up from 6.6% to 6.7% in March, albeit remaining below the peak of 6.9% in November 2024.
  • Total hours worked rose 0.4% month-over-month in March following a notable drop of 1.3% in February, causing quarter-over-quarter growth to advance by 2.0% annualized. Average hourly wage growth slowed to 3.6% y/y, still above the 3.5% in January but otherwise the slowest pace since May 2022. Table 1 summarizes the key data points.
  • Our Q1 2025 real Canadian GDP growth forecast is tracking at 2.0% q/q annualized following the March employment data, in line with the forecast in the Bank of Canada’s (BoC) most recent Monetary Policy Report (MPR).

Implications

The Canadian job market came under pressure in March, marking the first monthly contraction since January 2022. Job losses were driven by a drop in full-time (-62k) and private sector (-48k) positions. Despite the March decline, the labour market has added 44.5k jobs since the beginning of the year, entirely in part-time positions (+91.2k).

March job losses were concentrated primarily in wholesale and retail trade (-29k), and information, culture and recreation (-20k). The end of the federal government’s GST/HST holiday in March may have played a roll in the drop in retail and wholesale hiring. A few sectors observed slight gains in employment, likely returning to normal after last month’s largely weather-induced declines. Across provinces, job losses were concentrated in Ontario (-27.5k), and to a lesser extent, Alberta (-15.4k) and Quebec (-4.9k).

Employment fell across the age spectrum, but the unemployment rate managed to hold steady (at 5.7%) for the economically important prime-aged workers (25 to 54 years) as well as for Canadians aged 55 years and over. While other age groups have experienced some month-over-month volatility, the overall trend in unemployment has remained stable since late last year.

Working-age population growth continued to decelerate, with younger demographics experiencing the most pronounced slowdown (graph 1). Despite this, the overall population grew by an annualized rate of 1.9% q/q in Q1 2025, marking the slowest advance since Q2 2022, yet still well above the pace needed to meet the federal government's aggressive target External link..

Reduced hiring in March may be an early indicator of stress in the Canadian labour market from the risks posed by President Trump's tariffs. Economic uncertainty will likely dampen economic growth in the coming quarters and lead to continued job losses (see our latest Economic and Financial Outlook External link.). Given the ongoing trade policy uncertainty south of the border, the Bank of Canada is likely to adopt a wait-and-see approach at its upcoming meeting on April 16, unless the current market selloff persists.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively.
IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.