Weak Canadian Job Creation Is The First Fallout From The Trade War
Today’s Labour Force Survey for March was weaker than expected. Employment decreased by 33,000 (-0.2%) in March, marking the first decline since January 2022. The drop followed minimal change in February and a streak of growth in November, December, and January, totaling 211,000 (+1.0%).
The employment rate—the proportion of the population aged 15 and older—fell by 0.2 percentage points to 60.9% in March. This partially reversed a 0.3 percentage point increase seen between October 2024 and January 2025.
Private vs. Public Sector Employment
Private sector employment dropped by 48,000 (-0.3%) in March, following minimal movement in February and a total increase of 97,000 (+0.7%) between November 2024 and January 2025. Year-over-year, private sector employment rose by 175,000 (+1.3%).
Public sector employment remained relatively unchanged for the third consecutive month, up 92,000 (+2.1%) compared with a year earlier. Self-employment also remained steady in March, up 81,000 (+3.0%) year-over-year.
Trade War Impact Becoming Evident
Economists had anticipated that the trade war would impact Canada’s labour market in March. With steel and aluminum tariffs in place, expectations were set for zero employment gains. While widespread layoffs haven’t emerged yet, Stellantis NV temporarily shut down assembly plants in Windsor, ON and Mexico, laying off 3,200 workers in Canada, 2,600 in Mexico, and 900 in the U.S.
These pressures—coupled with broader tariffs outside USMCA compliance—were expected to contribute to stagnant job growth. The jobless rate met expectations at 6.7%, just shy of the November 2024 cycle high.
Outlook: More Job Weakness Ahead?
Employment could face further downward pressure in the months ahead, depending on the evolution of the tariff situation. Average hours worked may also decline further as work-sharing programs are adopted to cope with reduced manufacturing output.
Unemployment Trends
The unemployment rate increased by 0.1 percentage points to 6.7% in March—the first uptick since November 2024. It had risen steadily from 5.0% in March 2023 to a peak of 6.9% in November 2024, before falling by 0.3 points in late 2024 and early 2025 amid strong job growth.
Since March 2024, unemployment has stayed above the pre-pandemic average of 6.0% (2017–2019). In total, 1.5 million Canadians were unemployed in March, up 36,000 (+2.5%) month-over-month and 167,000 (+12.4%) year-over-year.
Of those unemployed in February, 14.7% gained employment in March, compared to 18.6% in March 2024 (not seasonally adjusted). Long-term unemployment has risen, with 23.7% of unemployed individuals seeking work for 27 weeks or more, up from 18.3% a year earlier.
Hours Worked and Wage Growth
Total hours worked increased 0.4% in March after a 1.3% drop in February. Year-over-year, total hours worked were up 1.2%.
Average hourly wages rose 3.6% (+$1.24 to $36.05) year-over-year in March, following a 3.8% gain in February (not seasonally adjusted).
Sector-Specific Employment Changes
Wholesale and Retail Trade
Employment in wholesale and retail trade declined by 29,000 (-1.0%) in March, partially reversing a February increase of 51,000. Year-over-year, this sector saw little change overall.
Information, Culture, and Recreation
After five months of relative stability, this sector lost 20,000 jobs (-2.4%) in March. Despite this drop, employment remained relatively flat year-over-year.
Agriculture, Other Services, and Utilities
Employment in agriculture fell by 9,300 (-3.9%) in March. However, “other services” (e.g., personal and repair services) grew by 12,000 (+1.5%), and utilities saw an increase of 4,200 jobs (+2.8%).
Bottom Line
U.S. employment data released the same day showed stronger-than-expected growth, contrasting with Canada's contraction. While Canada’s job market shed the most positions in over three years, the decline was led by trade-exposed industries.
Trade tensions stemming from U.S. President Donald Trump’s tariffs and Canada’s retaliatory measures have started to take a toll on the Canadian labour market. Though Canada recently avoided another round of reciprocal tariffs, the Bank of Canada now faces the difficult task of balancing inflation pressures with weakening employment data.
Stock markets have plunged, marking their worst decline since March 2020. Bond markets are rallying, and interest rates are dropping sharply. The Bank of Canada’s next rate decision is set for April 16, the day after March inflation data is released. That report will be pivotal as the central bank navigates the delicate balance between curbing inflation and supporting employment.
Market sentiment currently puts the odds of a 25 basis point rate cut this month at just 33%. While the BoC might hold off this round, a slowdown appears imminent—rate cuts could arrive as soon as June.
Source - Dr Sherry Cooper - DLC
Posted by Adam Chahl on
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