Canada’s Job Market Signals Recession as Economy Weakens

Canada’s employment data is painting a bleak picture of the economy. According to Statistics Canada’s Survey of Employment, Payrolls and Hours, the country lost 54,100 jobs in March, following a drop of 40,200 in February, the worst two-month stretch since early 2020. The April Labour Force Survey showed no significant rebound, reinforcing fears that Canada is sliding into a recession.

The biggest red flag? The downturn isn't limited to one sector. While manufacturing shed a modest 1,800 jobs, the services sector saw a staggering loss of 59,500 positions in March. This follows a 32,700 job decline in February, making it the sharpest back-to-back monthly drop in years.

What’s driving this decline? The pain is hitting interest-sensitive industries hardest — including real estate, construction, retail, and finance, all of which are calling for rate relief from the Bank of Canada. Even accommodation and food services, usually buoyed by domestic demand, dropped 8,400 jobs and have declined for three straight months, suggesting growing household financial stress.

Other warning signs include weakening wage growth and rising unemployment. Salaried workers saw no wage growth in March, and hourly workers’ wages fell 0.2%. Meanwhile, the unemployment rate has jumped from 5.1% two years ago to 6.9% today, and the broader R-8 unemployment measure (including all underutilized labor) rose to 9.2%.

Despite strong stock market performance, economic fundamentals are deteriorating. Real GDP growth is just 1.6% year over year, but population growth is 2.7%, meaning real per capita economic output is actually falling. Less than 60% of new job seekers in the past year have found employment, and the unemployed population has grown by 14% to 1.55 million.

All signs point to a slowdown, and pressure is mounting on the Bank of Canada to cut interest rates. Inflation is no longer a threat — economic stagnation is. The Canadian dollar is vulnerable, and bond markets are beginning to reflect this shift.

Canada’s job market is flashing recession warnings. The central bank needs to act, not to fight inflation, but to stabilize a faltering economy.