Canada’s labour market is off to the worst start since the Great Recession in 2009, (not counting the pandemic) – shedding 112,000 jobs in the first four months. Should we be worried?

Not according to economists at Royal Bank of Canada , who say “key hidden trends” are signalling that the nation’s job market is in better shape than it looks.

But first the bad news. There’s no denying that Donald Trump’s tariffs have cost jobs in Canada.

U.S. demand accounted for 12 per cent of total employment in this country in 2024, said RBC, a percentage that rises to 41 per cent in manufacturing jobs. In the auto industry and aluminum production, the share tops two-thirds.

Employment in these sectors has dropped two per cent since February 2025, but the weakness has not spread, said RBC senior economist Claire Fan . In other areas of the economy, employment grew by one per cent over the same period.

RBC expects tariffs to continue to pressure these sectors, but believes increased spending by consumers, businesses and governments will support growth in the remaining 90 per cent of jobs that focus on domestic demand.

Moreover, the job losses that raised eyebrows in three of the first four months of the year were not due to layoffs. These have fallen 10 per cent between October 2025 and this April.

“Low hire, low fire” best describes today’s labour market, said Fan. It’s not so much that people are losing their jobs; it’s just harder to find them. Weak hiring has left many entrants to the job market, especially young Canadians, without work and pushed the share of new jobs to a near record low in April.

One encouraging sign is that “hidden unemployment” appears contained. This is when people can only find part-time work or get discouraged and drop out of the workforce altogether.

Analyzing the data, RBC found no signs that Canadians, even young job seekers, were giving up on their job searches “en masse.”

“Longer job searches are concerning, but they do not flag the same kind of layoff-driven labour market weakness typically seen, for example, at the beginning of a recession ,” said Fan.

And hiring demand may be picking up, despite the recent uncertainty around the Iran war and rising fuel prices.

A recent Canadian Federation of Independent Business survey showed that the number of small and medium-sized businesses expecting to add jobs over the next few months continued to rise in April.

Whether that actually translates into job growth remains to be seen, she said, but there is another force at play — slower immigration and an aging population.

After the federal government clamped down on the numbers coming into the country in 2025, Canada’s workforce began to age. This spring the labour force participation rate hit its lowest level since 1997, excluding the pandemic, as a record number of Canadians retired.

This falling participation rate means that the economy actually needs fewer jobs to keep the unemployment rate steady or declining in the year to come.

“Headline labour market data in Canada looks gloomy in 2026, but beneath that lies more encouraging details,” said Fan.

RBC forecasts “a gradual downshift” in the jobless rate this year, as domestic demand remains resilient and the labour supply is constrained.

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Canada’s TSX should continue to beat America’s S&P 500 this year, predicts Desjardins Group — though “the performance gap has narrowed.”

The strategy team said Canadian equities’ “linkage to hard assets” has helped drive an unprecedented surge in buying, as their chart shows, and earnings expectations remain strong.

Their expectations of the S&P 500, however, are “tempered” despite the revival of the artificial intelligence theme.

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The flaw in the house-as-retirement-piggy-bank plan is that you have to sell it or borrow against it to access the money. Financial Post columnist Garry Marr looks at whether falling house prices could delay your retirement. Read more

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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