Canada’s unemployment rate increased 0.1 percentage points to 7.0% in May, the highest rate since September 2016 (excluding 2020 and 2021, during the pandemic). The uptick in May was the third consecutive monthly increase; since February, the unemployment rate has risen by a combined total of 0.4 percentage points, reported Statistics Canada on Friday.
“There were 1.6 million unemployed people in May, an increase of 13.8% (+191,000) from 12 months earlier. A smaller share of people who were unemployed in April transitioned into employment in May (22.6%), compared with one year earlier (24.0%) and compared with the pre-pandemic average for the same months in 2017, 2018 and 2019 (31.5%) (not seasonally adjusted). This indicates that people are facing greater difficulties finding work in the current labour market,” said the federal agency.
“The average duration of unemployment has also been rising; unemployed people had spent an average of 21.8 weeks searching for work in May, up from 18.4 weeks in May 2024. Furthermore, nearly half (46.5%) of people unemployed in May 2025 had not worked in the previous 12 months or had never worked, up from 40.7% in May 2024 (not seasonally adjusted).
“The layoff rate—representing the proportion of people who were employed in April but had become unemployed in May as a result of a layoff—was 0.6%, unchanged from May 2024 (not seasonally adjusted).”
Credit: Ron Lach
Statistics Canada said employment was little changed in May (+8,800; +0.0%) and the employment rate held steady at 60.8%.
“In May, employment among core-aged (25 to 54 years old) women increased by 42,000 (+0.6%), while among core-aged men it fell by 31,000 (-0.4%). Employment was little changed for youth and people aged 55 years and older,” said the report.
“In May, employment grew in wholesale and retail trade (+43,000; +1.5%), information, culture and recreation (+19,000; +2.3%), finance, insurance, real estate, rental and leasing (+12,000; +0.8%) and utilities (+4,900; +3.1%). Employment fell in public administration (-32,000; -2.5%), accommodation and food services (-16,000; -1.4%), transportation and warehousing (-16,000; -1.4%) and business, building and other support services (-15,000; -2.1%).”
The employment rate—the proportion of the population aged 15 and older who are employed—was unchanged at 60.8% in May, matching a recent low observed in October 2024. The employment rate had previously fallen for two consecutive months in March (-0.2 percentage points) and April 2025 (-0.1 percentage points).
Andrew Grantham
Andrew Grantham, Senior Economist, CIBC Capital Markets, said the Canadian labour market continues to weaken, albeit for now only gradually.
“While employment managed to register a modest and unexpected increase in May (+9K vs -10K consensus), that was still below the pace of labour force growth and as a result the unemployment rate ticked up to 7.0% as anticipated. Employment fell as expected in trade-sensitive areas such as manufacturing and transportation & warehousing. A decline in public administration jobs reflected the unwinding of temporary positions in the prior month linked to the Federal election,” he said.
“However, job growth outside of those areas was slightly stronger than anticipated, mainly driven by a 43K gain in wholesaling & retailing. While the mix of jobs appeared positive (+58K full time with part time declining), that didn’t result in any pick up in hours worked which Statistics Canada stated were flat on the month and up only 0.9% y/y. Average earnings for permanent workers were up 3.5% y/y, which was modestly above expectations but well below prior peaks and unchanged from the previous month.
“While today’s data were not quite as bad as expected, there’s still signs of slack gradually building in the labour market which supports our call for a return to interest rate cuts at that July meeting, albeit admittedly with a lot more data and tariff news still to come before that decision.”
Douglas Porter
Douglas Porter, Chief Economist, BMO Capital Markets, said the May jobs report definitely could have been worse, given that it was burdened by the loss of more than 30,000 election workers—any increase is a small win.
“And the gains in private-sector and full-time jobs are encouraging. But, standing back, the bigger picture is that the manufacturing sector is under intense strain amid the deep trade uncertainty, and the overall job market continues to soften—highlighted by the grinding rise in the unemployment rate. In little more than two years, the jobless rate has risen by 2 percentage points, as we have gone from a situation in 2022 and 2023 when it was difficult to find workers to, today, when it is difficult to find work. While May’s mixed report doesn’t give a clear-cut signal to the BoC, we believe that the bigger trend of a rising jobless rate will keep them very much in easing mode through the second half of the year,” he said.
Leslie Preston
Leslie Preston, Managing Director, Senior Economist, TD, said Canada’s labour market continued to soften in May. The unemployment rate continued to rise, and the impact of U.S. tariffs is clearly evident in industry and regional patterns. Wage gains were steady in May but have cooled from a roughly 5% pace a year ago.
“On Wednesday, the Bank of Canada opted to wait and see how tariffs would impact the Canadian economy, while also weighing recent hotter than expected inflation readings. May’s jobs report puts another mark in the economic weakness tally. We think this will ultimately lead to further rate cuts from the Bank of Canada.”
Claire Fan
Claire Fan, Senior Economist, Royal Bank of Canada, said another small positive print (+8.8k) in job growth in May was firmer than expected, and shows resilience in the Canadian labour market amidst ongoing trade grievances that sent Canadian exports plunging in April.
“Sectors that are the most exposed to trade headwinds, namely manufacturing and transport and warehousing shed jobs. The level of manufacturing employment is also at its lowest level since January 2023, particularly affecting regions like Windsor Ontario where the unemployment rate rose to nearly 11% in May,” she said.
“Still, employment counts were firmer in other sectors including wholesale and retail, supported by resilient domestic consumer spending. Overall, data is consistent with our view that labour market is softening but not collapsing. We expect trade disruptions will keep acting as headwinds, but think further deterioration will be contained with the unemployment rate peaking at levels slightly above May’s 7.0% reading.”
Mario Toneguzzi
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