Canada: 4 in 5 Job Losses in July Felt by Youth

The Canadian labour market in July gave back about half the outsized gain realized in the month prior, at -41k jobs. Job losses were felt heavily in the construction sector (-22k), raising potential concerns about the future of homebuilding amid an ongoing housing crisis. Employment in the public sector was little changed (+4k) despite announcements of federal government belt tightening. The loss of 51k full-time jobs in July reversed nearly all the gains made in the first half of the year.

The unemployment rate held steady for prime aged workers (ages 25 to 54 years) at almost 6% in July. Despite the summer job market being in full swing, job losses were highly concentrated among youth (ages 15 to 24 years) at -34k jobs, while their unemployment rate reached nearly 15%, (graph 1). 

Labour market conditions are gradually weakening, with the unemployment rate treading water at about 2 percentage points higher than the low achieved three years ago and fewer job openings to fill (graph 2). Long-term unemployment continued to rise, with 1 in 4 prime aged job searchers experiencing at least 6 months of unemployment. Permanent layoffs ticked up, albeit remaining below recessionary levels. Nevertheless, additional questions asked in the survey revealed that a whopping 96% of workers ages 25 to 64 reported being very confident, quite or somewhat confident in their employment prospects. Of those who were not very confident or not at all confident, their primary reasons were layoffs in the industry (28%), lack of skills, experience, education or credentials (14%) and tariff-related trade uncertainly (12%). Less than 7% selected automation or artificial intelligence (AI) as their primary reason.

Average wage growth held steady in the goods sector at 2.8% and increased marginally in the services sector to 3.5%, but both remain down from peaks of over 5% in 2024 (graph 3). Wages are expected to remain subdued through the remainder of 2025 as labour demand weakens.

Looking ahead, Canada remains in trade war purgatory, with US tariffs rising to 35% on non-CUSMA-compliant goods. The Bank of Canada held rates steady External link. for the third consecutive time last week, noting that Canada’s counter-tariffs could add up to 0.6 percentage points to inflation. But reading between the lines, it looks like the Bank is anticipating a return to monetary easing later this year, with two out of the three scenarios presented in the July Monetary Policy Report in favour of further cuts.