As of May 2025, Canada’s unemployment rate stands at 7.0%, a marginal increase from 6.9% in April 2025, according to Statistics Canada. This rate, the highest since September 2016 outside pandemic years, reflects a labor market grappling with economic slowdowns, global trade tensions, and demographic shifts. This report explores the current state, trends, regional and sectoral impacts, demographic disparities, and underlying factors shaping Canada’s unemployment landscape in 2025, alongside projections and policy implications.
Current Unemployment Rate and Trends
In May 2025, the unemployment rate reached 7.0%, up 0.1 percentage points from April’s 6.9%, as reported by Statistics Canada. Despite adding 8,800 net new jobs, the labor force grew faster, with 1.6 million unemployed individuals, a 13.8% rise (+191,000) from May 2024. The average unemployment duration extended to 21.8 weeks, compared to 18.4 weeks a year earlier, and 46.5% of the unemployed had not worked in the past 12 months or never worked, up from 40.7% in May 2024.
The chart above illustrates the upward trend since early 2023, when the rate was 5.4%, climbing steadily to 7.0% by May 2025. This trajectory suggests persistent challenges in job creation relative to labor force growth.
| Month | Unemployment Rate (%) | Change from Previous Month |
|---|---|---|
| March 2025 | 6.7 | – |
| April 2025 | 6.9 | +0.2 |
| May 2025 | 7.0 | +0.1 |
Regional Variations
Unemployment rates vary significantly across Canada. In May 2025, the highest rates among the 20 largest Census Metropolitan Areas (CMAs) were in Windsor (10.8%), Oshawa (9.1%), and Toronto (8.8%), based on three-month moving averages. These regions, particularly in Southern Ontario, face economic uncertainty due to tariffs on motor vehicle and parts exports, which have disrupted manufacturing. Windsor’s rate rose by 1.7 points and Oshawa’s by 0.9 points since January 2025, per Statistics Canada.
Other regions, such as Alberta, may have different dynamics, but specific data is limited. These disparities underscore the need for region-specific economic strategies.
Sector-Specific Impacts
The labor market in May 2025 shows mixed sectoral performance, as noted by TD Economics. Key observations include:
- Manufacturing: Lost 12,200 jobs, part of a four-month decline totaling 55,000 jobs, likely due to trade tariffs.
- Transportation and Warehousing: Shed 15,500 jobs, reflecting supply chain disruptions.
- Wholesale and Retail Trade: Gained 43,000 jobs, offsetting earlier losses.
| Sector | Job Change (May 2025) |
|---|---|
| Manufacturing | -12,200 |
| Transportation and Warehousing | -15,500 |
| Wholesale and Retail Trade | +43,000 |
These shifts highlight the vulnerability of export-dependent sectors to global trade policies, while domestic demand supports retail growth.
Demographic Disparities
Certain groups face higher unemployment rates, exacerbating inequality. According to Statistics Canada:
- Youth (15-24): Unemployment rate at 14.2%, with returning students facing 20.1%, up 3.2 points from May 2024. Young men (22.1%) and women (18.4%) both saw increases.
- Core-Aged Men (25-54): Rate at 6.2%, up 0.4 points from April.
- Core-Aged Women (25-54): Rate at 5.7%, stable.
- Older Workers (55+): Rate at 5.3%, little changed.
Newcomers and youth, comprising about 25% of the labor force, accounted for roughly 75% of the unemployment rise since early 2023, per the Bank of Canada. The influx of non-permanent residents, averaging 11% of the labor force in mid-2024 (up from 7% in late 2022), has intensified competition for jobs.
| Age Group | Unemployment Rate (May 2025) | Change from April 2025 |
|---|---|---|
| Youth (15-24) | 14.2% | Little change |
| Core-Aged Men (25-54) | 6.2% | +0.4 |
| Core-Aged Women (25-54) | 5.7% | Little change |
| 55+ | 5.3% | Little change |
Factors Influencing Unemployment
Several factors contribute to the rising unemployment rate, as outlined by the Bank of Canada:
- Slow Hiring Pace: Past interest rate hikes reduced economic demand, limiting job openings, particularly for newcomers and youth.
- Sectoral Weakness: Newcomers and youth are overrepresented in sectors like accommodation and food services, which have seen weak growth.
- Newcomer Influx: Non-permanent residents increased from 7% to 11% of the labor force by mid-2024, straining job absorption.
- Labor Retention: Businesses, wary of future labor shortages, retain workers, slowing hiring rather than increasing layoffs.
Additionally, trade tariffs, particularly on automotive exports, have hit manufacturing-heavy regions, as noted by TD Economics. These external pressures compound domestic challenges.
Economic Context and Policy Responses
Canada’s unemployment rate is shaped by broader economic conditions. In April 2025, Canada’s rate (adjusted to US concepts) was 5.8%, 1.6 points higher than the US (4.2%), a wider gap than the 0.9-point average from 2017-2019. Globally, Canada’s 7.0% rate exceeds the Euro Area’s 6.4% and the UK’s 4.3% but aligns with developed economies facing similar pressures.
The government has responded with measures like extended employment insurance, wage subsidies, and training programs to support workers. Efforts to resolve US trade disputes aim to stabilize manufacturing. However, the effectiveness of these policies depends on global economic recovery and domestic demand.
Historical Context
Historically, Canada’s unemployment rate was 5.0% in 2019, spiked to 13.7% in May 2020 during the pandemic, and fell to 5.0% by February 2022. The current 7.0% is below the 8.7% peak of August 2009 but signals a weakening labor market compared to pre-pandemic levels, per Statistics Canada.
Wage Growth and Inflation
Wage growth slowed to 3.4% year-over-year in May 2025, down from 3.6% in March, reflecting a softening labor market. Inflation, at 2.1% in April 2025, remains within the Bank of Canada’s 1-3% target, suggesting easing inflationary pressures that may influence future interest rate decisions.
Impact of Technology and Automation
Technological advancements, particularly automation, pose both risks and opportunities. Manufacturing and transportation, already hit by tariffs, face further job displacement from automation. However, new roles in technology and services could offset losses if workers are retrained. Government investments in skill development aim to facilitate this transition.
Sustainability and Green Jobs
Canada’s push for a low-carbon economy, with targets for reduced emissions, is expected to create “green jobs” in renewable energy and clean technology. This transition requires supporting workers from traditional sectors like fossil fuels through retraining, ensuring an inclusive shift.
Future Outlook
Projections from Trading Economics suggest the unemployment rate will hold at 7.0% through Q2 2025, declining to 6.5% in 2026 and 6.3% in 2027, assuming trade resolutions and economic stabilization. However, persistent global uncertainties could delay recovery.
Conclusion
Canada’s unemployment rate of 7.0% in May 2025 reflects a complex labor market shaped by economic slowdowns, trade tensions, and demographic shifts. Regional disparities, sectoral challenges, and disproportionate impacts on youth and newcomers highlight the need for targeted policies. While government measures and a potential green job boom offer hope, resolving trade disputes and fostering inclusive growth are critical for a robust recovery. Continued monitoring and adaptive strategies will ensure Canada’s labor market remains resilient.
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