The State of Canada's Job Market
Canada's job market shows resilience but deepening cracks for youth and wage earners
Canada's unemployment rate has edged up to 5.5% in January 2026, reflecting a cooling labour market after years of pandemic recovery. While overall joblessness remains low by historical standards, youth unemployment has surged to 6.7%, exposing structural vulnerabilities. Wage growth is struggling to keep pace with inflation, and the rise of part-time work signals shifting employment patterns.
Canada's unemployment rate inches upward after years of decline
Canada's unemployment rate rose to 5.5% in January 2026, up from 5.4% in December 2025. This marks a slight increase from 5.3% a year ago but remains below the 5-year average of 6.1%. The trend over the past five years shows a steady decline from 6.8% in 2022 to 5.5% in 2026, reflecting a post-pandemic recovery that is now stabilizing. The Bank of Canada's interest rate hikes in 2022-2023 slowed hiring, but the labour market has shown surprising resilience. However, the recent uptick suggests a potential softening in demand for workers.
Canada's unemployment rate over five years
Source: Statistics Canada, Table 14,100,287
Youth unemployment crisis deepens as job market tightens
Youth unemployment (ages 15-24) has climbed to 6.7% in January 2026, up from 6.5% in December 2025 and 6.6% a year ago. This is a sharp increase from 5.1% in 2022, when the labour market was still rebounding from COVID-19 disruptions. The five-year trend shows a steady rise, peaking at 6.8% in 2025 before a slight dip in 2026. Experts attribute this to a mismatch between youth skills and employer demands, as well as increased competition from older workers and immigrants. The youth unemployment rate is now nearly double the overall rate, highlighting a growing crisis.
Youth unemployment rate over five years
Source: Statistics Canada, Table 14,100,287
Wage growth lags behind inflation, squeezing household budgets
Average hourly wages grew by just 3.2% year-over-year in January 2026, down from 4.1% in December 2025. This is well below the inflation rate of 4.8% over the same period, meaning real wages are declining. The five-year trend shows a gradual slowdown in wage growth, from 5.1% in 2022 to 3.2% in 2026. The Bank of Canada's interest rate hikes have contributed to this slowdown, as employers become more cautious about hiring and wage increases. The federal government's 2023-2024 wage subsidies for certain sectors have also expired, further limiting wage growth.
Year-over-year wage growth vs. inflation
Source: Statistics Canada, Table 14,100,287
Part-time work rises as full-time jobs stagnate
Part-time employment has increased by 2.1% year-over-year in January 2026, while full-time employment has grown by just 0.8%. This trend is part of a broader shift toward flexible work arrangements, accelerated by the pandemic and the rise of the gig economy. The five-year trend shows part-time work growing from 18.2% of total employment in 2022 to 19.5% in 2026. This shift is particularly pronounced among youth and older workers, who are more likely to hold part-time positions. The rise of remote work and AI-driven automation has also contributed to this trend, as employers seek to reduce fixed costs.
Part-time vs. full-time employment growth
Source: Statistics Canada, Table 14,100,287
Immigration and AI disruption reshape Canada's labour market
Canada's record-high immigration levels—over 470,000 permanent residents in 2023 and 2024—have eased labour shortages in some sectors but also increased competition for jobs. The five-year trend shows a 11.2% increase in the labour force due to immigration, which has helped keep unemployment low but has also suppressed wage growth. Meanwhile, AI and automation are disrupting traditional industries, with 37% of Canadian jobs at high risk of automation, according to a 2024 report. The federal government's 2025 AI strategy aims to reskill workers, but the transition is slow. The Bank of Canada's interest rate policy has also played a role, with higher rates discouraging investment in automation but also slowing job creation.
Immigration's impact on labour force growth
Source: Statistics Canada, Table 14,100,287