Summary: Labour market conditions in both Canada and the U.S. are in flux, presenting unique challenges on both sides of the border. Both economies face skills shortages and unique challenges. In this article, Aprio will look at the state of each market, the rising challenges, and how you can plan ahead to ward off labour issues.
The labour landscape in North America has been tightening since the pandemic, and a turbulent global economy and policy environment is only amplifying the pressure. For Canadian business owners, the message is clear: planning ahead isn’t just a good idea, it’s essential to avoid productivity gaps and stay competitive.
Here is a closer look at what is happening in the market and how you can navigate it.
The Canadian Economy in 2025: Tight, but Stabilizing
While the high inflation period post-pandemic has recovered and returned inside the Bank of Canada targets, Canadian businesses are now seeing a new, volatile trade environment. The shift toward globalization seen at the start of the decade has slowed, and in some cases, reversed. This creates uncertainty, supply shocks, and potential inflationary pressure. It also means once-established supply chains are shifting as businesses search for new trade partners and markets.
While Canada’s gross domestic product (GDP) slowed in 2023 after a pandemic boom, we saw moderate growth into the summer of 2024, driven largely by public sector and oil/gas activities. However, growth slowed in the private sector, with rises in the unemployment rate and a dip in productivity.
Throughout 2025, GDP has remained relatively stable, with growth in one quarter often offset by lapses in the next, and business investment flat. Aprio examines 2025’s GDP trends in more depth in a separate article. The most noticeable shift, however, was in the U.S.’s reintroduction of tariff-based trade policies that negatively impacted many Canadian businesses, especially in manufacturing and export, creating a cloud of uncertainty for the future.
The Current Canadian Labour Market
Despite economic fluctuation, the labour market remains tight. While there is more stability than was seen immediately after the pandemic, stable doesn’t mean easy. In November 2025, employment ticked up by 54,000 (about 0.3%), marking a marginal increase for a third consecutive month. However, this growth was concentrated in part-time work, mostly impacting:
- Alberta
- New Brunswick
- Manitoba
What the Data Tells Us
According to the Statistics Canada Labour Force Survey, the unemployment rate dropped by 0.4% to 6.5%, a year-on-year positive employment increase of 1.2%. Much of this growth was among younger workers, under 24 years of age, with little change for the core working age group of 25-54 years old. The private sector saw the bulk of this increase (0.4%), with little change for the self-employed and public sector.
The same three provinces saw employment growth, with little change elsewhere. However, while broad trends have their uses, these do not continue over all industries. Sectors that saw positive improvements include:
- Health care and social assistance
- Accommodation and food services
- Natural resources
Meanwhile, wholesale and retail trade saw a -1.1% decline, although it still saw improvement against 2024 levels. This is likely impacted by continued trade pressures from the U.S. market. Ontario and Quebec saw the greatest drops, and have seen little overall employment growth this year.
As for worker perceptions, the Labour Force Survey also shows that Canadian employees feel less secure in their jobs, especially in industries (like manufacturing) that are dependent on U.S. demand.
Comparing the U.S. Labour Market
While Canada has seen an overall stable labour market, with some small gains and more controlled losses, the U.S. faces a different situation. Due to the U.S. government shutdown, September 2025 data is the latest available for non-farm payrolls.
The U.S. unemployment rate sits at 4.4% with 7.6 million unemployed persons – a figure that has remained relatively unchanged since April 2025. The labour force participation rate was also relatively unchanged, and part-time work remained steady. Similar to Canada, healthcare, social assistance, and food services trended up, while transportation and warehousing roles declined. Other sectors remained steady.
However, U.S. labour market data in 2025 has been subject to elevated revision frequency and reporting disruptions related to administrative shutdowns, reducing confidence in short-term headline indicators. We have therefore seen private payroll data sets rise for U.S. employment. These show a labour market slowdown where November private sector losses are estimated at around 32,000, with small businesses bearing the brunt. A sharp decline in domestic jobs over the post-September months’ official data is cautiously predicted by these private data sets, particularly for these sectors:
- Professional and business services
- Information services
- Manufacturing
- Construction
- Financial activities
Why this matters to you: Widening job losses in the U.S. could increase hiring competition in adjacent Canadian industries, especially near the border. This often drives up wage demands and retention costs for Canadian employers.
Drivers Affecting Both Labour Markets
Regardless of which side of the border you operate on, four major trends are shaping the landscape.
- Aging Demographics: Aging workforces are a concern in both markets, particularly in skilled trades such as manufacturing and construction, which are having issues in incentivizing new workers. This makes Canada’s uptick in younger workers a positive sign.
- Skills Shortages: Finding job-ready technical candidates is getting harder. The rapid growth of AI and specialized tech has intensified the mismatch between available talent and open roles.
- Changing Worker Expectations: Workers want flexibility and supportive workplace cultures. They also want clear upskilling paths. This will drive turnover for businesses that can’t support these, or where work has to take place on-site.
- Productivity Constraints: As businesses are forced to do more with less due to tightening costs and skill shortages, labour issues can impact productivity and drive more technology adoptions.
What This Means for Canadian Businesses
While the Canadian labour market feels steadier than the U.S. right now, practical challenges remain, namely:
- Increased difficulty recruiting for industrial and skilled/technical roles.
- Heightened retention risks as employees seek security and growth.
- Cost pressures from rising wage and benefit expectations.
- Longer hiring timelines impacting production or service delivery.
- A greater need to train and develop talent internally.
Thriving in this constrained market requires businesses to stop reacting to the market and start planning for it.
How Canadian Businesses Can Create a Strategic Workforce Plan
Stability starts with strategy. To weather the storm of a tight labour market, Canadian businesses should focus on four strategic workforce areas:
- Prioritize Retention: It is more cost-effective to retain current employees than to recruit new ones. Focus on engagement and culture when labour markets are tight.
- Invest in Upskilling: Don’t wait for the perfect candidate to appear. Build internal capability to reduce reliance on external labour markets.
- Redesign Roles: Look for ways to cross-train employees to increase productivity and flexibility across your team.
- Embrace Automation: Technology isn’t just about efficiency; it reduces labour intensity and supports existing staff, helping to prevent burnout.
Succeeding Despite Labour Tightness
Economic challenges aren’t going away overnight, but they don’t have to stall business growth. By investing in productivity, internal capability, and a strong culture, businesses can build a workforce that encourages competition.
Aprio is here to help you navigate these shifts. We support small and mid-sized Canadian businesses with the financial and strategic advice needed to scale confidently. If you are reassessing your labour strategy, let’s connect.