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Economic Viewpoint

What’s Going On in Canada’s Labour Market? 
Foreign Versus Domestic Sources of Weakness

December 4, 2025
Randall Bartlett
Deputy Chief Economist

It has been a tough year for Canada’s labour market, with the US trade war topping the list of headwinds. However, the number of employed workers in Canada in September was only slightly lower than at the end of 2024 and was higher than it was 12 months earlier. That begs the question: what’s going on in Canada’s labour market?

It is important to first isolate how much of the current labour market weakness can be chalked up to the US trade war. We’ve estimated that the decline in demand for Canadian exports would typically have reduced employment by about 0.7 percentage points (ppts) so far this year. 

But US tariffs aren’t the only contributing factor to Canada’s labour market weakness. Fewer newcomer admissions and reduced federal government hiring have also been headwinds, albeit to a much lesser extent than reduced trade flows, at nearly ‑0.2 ppts and less than ‑0.1 ppts respectively. 

Despite these headwinds to hiring, relatively steady employment in Canada this year speaks to the resiliency of Canadian households and businesses in the face of numerous obstacles to growth and the uncertainty that lies ahead.

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.