Shifting Dynamics in Canada's Labor Market
A recent report from the Conference Board of Canada highlights a significant shift in the nation's labor market, projecting that wage increases will gain momentum in the coming years due to a slowdown in population growth. The think tank's latest economic forecast, released on July 7, indicates that the labor force grew at a slower pace than total employment in the first quarter of 2025, a trend attributed to Ottawa's efforts to curb immigration levels. This slowdown is expected to create a tighter labor market, giving workers more bargaining power for higher wages.
The report notes that Canada's unemployment rate rose to seven percent in May, yet overall employment remains 0.3 percent higher than at the end of last year. Despite this resilience, the Conference Board cautions that hiring demand will likely stay subdued for the remainder of 2025. Businesses are hesitant to expand payrolls amid uncertainties surrounding U.S. trade policies and potential tariffs, which continue to impact consumer and corporate confidence.
Economic Forecast and Trade Uncertainties
The Conference Board's economic outlook also projects Canada's GDP growth at 1.5 percent for 2025, a figure tempered by ongoing trade tensions with the United States. The think tank emphasizes that uncertainty over U.S. trade policies is a significant factor weighing on business decisions. This cautious approach among employers could further influence wage growth, as competition for existing talent intensifies in a market with fewer new entrants due to reduced immigration.
Pedro Antunes, Chief Economist at the Conference Board of Canada, commented on the evolving labor dynamics, stating, 'There is sort of a movement towards workers having a little more power.' This shift reflects a broader trend where employers may need to offer better compensation to attract and retain skilled workers in an environment of slowing population growth and persistent economic challenges.
Long-Term Implications for Canadian Workers
Looking ahead, the Conference Board's forecast suggests that the combination of slower immigration and trade uncertainties could reshape Canada's economic landscape. As population growth decelerates, the labor market is likely to become more competitive, potentially leading to sustained wage growth over the next few years. However, the muted hiring demand signals that businesses will remain cautious, balancing expansion plans against external economic pressures.
For Canadian workers, this could mean improved negotiating power for salaries and benefits, especially in industries facing labor shortages. The Conference Board's analysis underscores the importance of monitoring how immigration policies and international trade developments unfold, as these factors will continue to play a critical role in shaping the country's economic future.