Canada’s labour market posted its steepest employment decline since 2021 in the first four months of 2026, but economists say the weakness beneath the headline numbers is less severe than it appears. Falling layoffs, resilient consumer spending and improving hiring intentions are pointing to signs of underlying stability despite ongoing trade and geopolitical pressures.
BNN Bloomberg spoke with Claire Fan, senior economist at RBC, about why Canada’s labour market is currently defined by “low hire, low fire” conditions, how slowing immigration and rising retirements are tightening labour supply, and why improving domestic demand could help unemployment trend lower later this year.
Key Takeaways
- Canada’s labour market is being driven more by weak hiring than by widespread layoffs, with permanent layoffs trending lower since late 2025.
- Job losses remain concentrated in sectors exposed to U.S. trade policies, including manufacturing, auto production and aluminum processing.
- Businesses are signalling stronger hiring intentions, though economic uncertainty and rising input costs are delaying actual job creation.
- Younger workers continue to face the greatest challenges as employers scale back entry-level hiring amid economic uncertainty and AI adoption concerns.
- Slower immigration and accelerating retirements are tightening labour supply and could help stabilize unemployment despite softer employment growth.
Read the full transcript below:
LINDSAY: Between January and April 2026, Canada’s labour market had its steepest decline in employment since 2021. However, upon taking a closer look at trends in layoff activity, hiring intentions and retirement, our next guest is seeing reasons to be optimistic. So, let’s get more now from Claire Fan, senior economist at RBC. Good morning. Thanks for joining us.
CLAIRE: Thanks for having me, Lindsay.
LINDSAY: Let’s go into a little more detail about some of the trends you’re seeing and why you feel there’s some room for optimism here.
CLAIRE: Absolutely. I mean, like you said, January to April, Canada in total lost over 100,000 jobs, which is quite gloomy as far as the headline employment counts go. But underneath the headlines, we’re actually seeing some pretty encouraging details again, including layoff numbers that have actually been on a trend lower since October of 2025.
So broadly, I think really today’s backdrop in Canada’s labour market can be broadly characterized very simply by low hire, but also low fire. So companies are not necessarily laying off workers. It’s really just this environment of really stagnant hiring activities that’s leading to rising unemployment because a lot of new labour market entrants — these are new graduates or people who have previously stepped away from the workforce — they’re entering the labour market, but the hiring demand simply isn’t there.
LINDSAY: Yeah, okay, so still pretty gloomy then. There just aren’t as many jobs. So what’s the reason for that kind of low fire, that kind of less hiring at this point? Are businesses just not optimistic about the future, not sure where investments are going to be coming from in the next couple of months?
CLAIRE: Yeah, I think that’s certainly one of it. I mean, when you talk about different sectors and their performances, we are seeing actual job losses in the ones that are exposed to U.S. trade policies. So these include a slew of manufacturing subsectors, most notably in auto manufacturing as well as aluminum production and processing.
So there are actual soft spots where layoffs are happening. But on an aggregate level, again, it is that soft hiring sentiment and, to your point, just headwinds, mostly external. Last year, of course, the broader trade environment was creating — and still is creating and persisting — a lot of uncertainty for businesses.
And then this year, of course, we’ve heard multiple reports from businesses in different industries reporting that their input costs are starting to rise quite significantly because of the gasoline price increases that we’ve seen since the end of February. So all these considerations are perhaps just adding or holding businesses back from posting the job postings that they were going to.
But besides that, domestically again, we do want to highlight that consumer spending activities have been quite strong and resilient pretty much throughout the course of 2025. This morning’s retail sales data actually looked a bit softer. A lot of that probably is coming through in the form of households seeing really, really high gasoline prices and starting to think or reallocate their spending accordingly as well.
So we’re still cautiously optimistic about the labour market outlook, pending, of course, everything that evolves around the Middle East conflict and, by extension, gasoline prices here in Canada and its impact on household demand and, by extension, labour market conditions as well.
LINDSAY: There’s a lot of trickle-down effects here. I want to go back to businesses and how they’re not hiring right now because, as you mentioned in your report, you say businesses are expressing hiring intentions, but they haven’t actually translated into actual job growth yet. So what needs to happen for these intentions to actually turn into new jobs?
CLAIRE: I think just longer periods of really operating stability, which is hard to come by these days. And another factor that often gets lumped into the conversation of a soft labour market, particularly on the youth end, is the impact of AI and sort of what it is having on the Canadian labour market.
Although I think previous research by Statistics Canada hasn’t really found any significant evidence of workers getting displaced, I think speaking of soft hiring demand, that has to be one of the factors as well. Businesses are again seeing a lot of headwinds, seeing a lot of uncertainty in their operating environment, and they’re also waiting maybe perhaps to an extent to see just how much productivity gains they can get really from utilizing all of these new technologies, including AI, that are advancing quite rapidly these days.
So I think all of these potentially are factors, although again, I think just a couple days ago, we’ve actually seen some pretty encouraging data when it comes to the summer jobs market from Indeed Hiring Lab that’s flagging signs of stabilization. So perhaps that pickup in hiring intentions earlier in the quarter is starting to finally translate to perhaps not quite the improvement in labour market or job growth that we’re expecting or hoping to see, but at least signs of stabilization.
LINDSAY: Weak hiring has particularly impacted young workers in entry-level positions. How much of this weakness is a result of a weak economy versus AI replacing these positions, which we are seeing more of nowadays?
CLAIRE: Yeah, that’s a great question, and this is a question that many economists are pondering these days. What we do know, again, is the hiring side of things is extremely weak. Again, it’s likely a combination of both those things. One is, of course, the cyclical trends when it comes to just broader softer external headwinds — again, trade, oil prices, rising input costs, squeezed margins. All of these will be weighing on business hiring intentions more significantly stepping into Q1.
The longer oil prices stay high, the more pronounced these negative impacts will be. And then on top of that, of course, everything that we just talked about when it comes to AI as well likely played a role. So I do think it’s definitely a combination of both factors, and that’s also from anecdotal experiences when we go out to talk to businesses as well. But it’s just hard to disaggregate exactly which one is which.
And speaking of aggregate structural trends on the supply side, there is another factor that’s also having a profound impact on Canada’s labour market these days, and that is the change in immigration, a slowing population that we’ve seen. Not necessarily a positive essentially because really the slowdown in immigration — and these tend to be younger workers, younger labour supply as well — means the labour force will be shrinking. It also means the Canadian labour force will be older because of the lack of immigration as well.
So on the labour supply side, there also are some constraints that are coming through. So when demand does pick up, like we expect later this year, there simply might not be a lot of available workers, especially more experienced workers to replace those that are currently retiring. So another structural trend that’s perhaps worth highlighting as well.
LINDSAY: For sure. There’s just so many different trends here to kind of keep in mind. So with all of those factors that you just mentioned, before we wrap up here, what are you going to be watching closely in the labour market throughout the rest of 2026 that might impact the year ahead in 2027?
CLAIRE: That’s a great question. So leading indicators are the things that we watch. So these include job postings. Next week’s StatCan data as well for job vacancies is a great leading indicator for just general relative demand-supply dynamics in the labour market.
And it is worth it to note to the general public that are reading these headline labour statistics that immigration is having an impact on so-called break-even employment. That means Canada can actually lose some jobs this year and still have the unemployment rate broadly staying steady or, if not, trending lower.
So that is just to say that we all perhaps should be paying more attention to the unemployment rate statistic that’s less influenced by some of the structural changes in the economy and demographic trends, including slowing immigration.
And our forecast again is cautiously optimistic. We’re really anticipating some resilience in domestic demand and spending will support this gradual translation between hiring demand to actual job growth later this year, and for the unemployment rate to start trending lower towards 6.3 per cent by the end of this year. That is still our base-case forecast.
But I would say that risk toward that forecast is really toward the downside, meaning that again there are just simply a lot of headwinds externally that are playing out, and we still need to track them very, very closely to see exactly how hiring demand will turn out later this year.
LINDSAY: Okay, we’ll leave it there. Claire Fan, senior economist at RBC. Thanks so much for your time. Appreciate it.
CLAIRE: Thanks for having me.
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This BNN Bloomberg summary and transcript of the May 22, 2026 interview with Claire Fan are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
