Economists expect modest hiring to mask slowly improving conditions for individual workers
Canada’s labour market has continued to look softer on the surface than conditions experienced by individual workers, according to a new analysis from RBC Economics that framed a shrinking labour force as the key to recent unemployment trends.
The note from assistant chief economist Nathan Janzen and senior economist Claire Fan pointed to a modest rebound in hiring. They expect April’s Labour Force Survey to show a gain of about 25,000 jobs, following losses in January and February that only partially reversed in March.
Even with that April increase, total employment would still have been down roughly 70,000 in the first four months of 2026.
Still, the economists said that pace would likely be enough to push the unemployment rate down to 6.6% from 6.7%, further below the 7.1% peak seen in August and September 2025.
“We expect employment to remain broadly consistent with a gradual improvement in per‑worker conditions after controlling for an unprecedented pullback in labour force growth,” Janzen and Fan said.
Trade‑exposed sectors took the hit
The economists said aggressive federal immigration caps and population aging “sharply lowered the amount of employment growth needed to push the unemployment rate […] lower.”
“Employment in sectors heavily exposed to U.S. trade (with 35% or more jobs due to demand from the U.S.) have declined 3% since February 2024, while other sectors grew by 1%,” they said.
Weakness, they added, has been “largely contained to trade‑exposed sectors with little evidence of spreading.”
Early‑2026 job losses were not driven by structural cuts, they said.
“Permanent layoffs have declined. Early 2026 job losses were not driven by permanent layoffs, which have fallen since October 2025. Instead, temporary layoffs and future starts […] account for recent increases.”
Little evidence of hidden slack
“The unemployment rate provides a ‘clean’ read of per‑worker conditions only if discouraged workers are not giving up their jobs or being pushed into part‑time work when they would rather have full time jobs,” the analysis said.
However, broader measures such as R‑8, which include discouraged and involuntary part‑time workers, stays aligned with the headline rate and “relatively unchanged from a year ago,” suggesting weakness is “not masked beneath the surface.”
Business sentiment also looks to be turning a corner. Citing the Bank of Canada’s February Business Outlook Survey, Janzen and Fan said firms reported “strengthening hiring and investment intentions” focused on productivity and capacity expansion, underpinned by “a healthy rebound in household spending in 2025, and substantial improvement in trade uncertainties.”
Beyond the labour data, they highlighted a highly volatile trade backdrop.
“Canadian international trade data has been exceptionally volatile, but the merchandise trade deficit should narrow in March with a 40% surge in oil prices due to the Middle East conflict pushing the energy surplus higher,” they said.
They projected exports up almost 5% and imports up 1.5%, which would pull the deficit to about $3.8 billion from $5.7 billion in February.
South of the border, the pair expect US nonfarm payrolls to have added “just 26,000 jobs in March—a number that, given current conditions, represents breakeven growth and has become routine,” with shrinking labour supply meaning “the U.S. does not need substantial job additions to maintain a steady unemployment rate.”
They said a drop in continuing claims between the March and April reference weeks support an unemployment rate holding at 4.3%, another data point Canadian mortgage lenders are watching for clues on rates and cross‑border demand.
The Canadian jobs backdrop is “not yet strong,” the economists said, noting only modest declines in unemployment and warning that a “spike in wages in March” is unlikely to be repeated.
Still, their base case assumes “further gradual improvements this year with the unemployment rate edging down to 6.3% by year end even with job growth softer than historically normal.”
If realised, this would leave mortgage professionals dealing with a slower but still fundamentally functioning labour engine behind borrowers’ paycheques.
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