The recent past can be a useful guide to what may happen in the future. Many of the themes that will define the Canadian labor market in 2025 have been in place since at least 2022, and many will certainly continue into 2026. Still, recent fast-moving trends related to trade, immigration, and the new era of AI will also leave their mark in the coming year.
Amid the turbulence of the Canadian economy in 2025, the labor market was soft but fairly stable. These moves were reflected in employer demand, but the response was not dramatic. The vacancy rate fell from 3.1% in Q3 2024 to 2.8% in Q3 2025, a slower decline than the previous year’s decline (4.0% to 3.1%). The stable job postings on Indeed from September to November 2025 indicate that there has been little change in job openings since then.
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The 2025 unemployment rate was also not particularly sensitive to further demand declines. The unemployment rate rose from 6.6% in mid-2024 to an average of 7.0% in the third quarter, but fell to 6.5% in November. Recent economic forecasts suggest modest improvement expected into 2026. Although not particularly strong, the projected pace of GDP growth is likely to outpace projected population growth and should be fast enough to reduce unemployment slightly and stabilize job vacancies. At the same time, however, it is unclear whether this growth will be enough to meaningfully reverse the negative trends that have affected job seekers in recent years.
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The labor market has softened across Canada since 2022, but the strength heading into 2026 varies widely by province. Ontario is not only struggling with one of Canada’s highest unemployment rates, averaging 7.6 per cent in the three months to November, but also recording the largest increase since late 2019. British Columbia is also experiencing a significant increase, but from a low starting point. Conversely, Quebec is doing well, with a recent unemployment rate of 5.4%, the lowest in Canada.
These trends have also made Quebec job seekers more optimistic about their future job prospects. Indeed Hiring Lab’s 2025 Workforce Insights Survey asked respondents who were actively looking for a job how confident they were that they would find a new job within the next month. Across Canada, 34% of respondents disagreed with the statement “I am confident that I will find a job quickly,” compared to just 28% in Quebec. Canada’s overall labor market may stabilize in 2026, but regional differences in conditions are likely to persist.
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Meanwhile, compared to relatively stable headline trends, several industries stand out, both positively and negatively. From Q3 2024 to Q3 2025, auto parts manufacturers, the main victims of the trade war, experienced the fastest decline in salaried employment, with salaries down about 7% year over year. Many of the next largest declines were concentrated in sectors more susceptible to other policy changes. A decline in the number of international students led to fewer jobs at community colleges, and positions in the federal civil service shrank after an early period of rapid growth.
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On the other hand, some of the fastest expanding industries in 2025 are sectors of the economy that have already grown significantly in recent years, and that trend is likely to continue next year. Job openings in warehousing and storage, as well as in couriers and messengers, grew at a steady pace year-over-year, showing that the infrastructure supporting the “on-demand” economy continues to grow. The same was true for social assistance (mainly childcare facilities) and outpatient medical services (such as clinics), supported by public funding and demographic changes.
While trends affecting labor demand often drive industry-specific trends, changes in labor supply may also have an impact over the coming year, especially given the outlook that population growth could turn negative in 2026. By mid-2025, year-on-year population growth reached its lowest level since 2016 (excluding the pandemic). The changes in Canada’s immigration policy driving these trends are likely to be even greater in 2026. Its share in the total population has declined from a peak of 7.6% at the end of 2024 to 6.8% by the end of 2025. This is because the inflow of new entrants has slowed since the beginning of 2024, while outflows have tripled.
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The pace of out-migration will be the main driver of both short-term population growth and its impact on the labor market going forward. Rising youth unemployment rates suggest that some vacant positions will not be particularly difficult to fill, especially in sparsely populated areas. Still, the large numbers of people in Canada on graduate work permits working across the economy with uncertain futures will create challenges for these workers and their employers alike in 2026.
Zooming out, AI’s presence in the labor market is growing, but its effects are less certain. A 2025 Workforce Insights survey found that 29% of Canadian workers report using some form of artificial intelligence in the workplace multiple times a week, which is on par with workers in several other developed countries, including the United States. Employer mentions of AI in Indeed job postings also jumped to 5.9% of Canadian job postings in November 2025.
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That said, hiring trends in some of the fields where AI is most utilized have been relatively slow in recent years. It is difficult to determine the extent to which weaker recruitment appetite for AI’s most vulnerable roles reflects the impact of the technology itself. One reason for this is that the divergence in posting trends from other job categories occurred primarily in the six months before and after ChatGPT’s general launch in the second half of 2022. From mid-2023 onwards, posts generally evolved similarly and remained relatively stable in 2025 despite a general increase in AI adoption.
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Regardless of the specific drivers of soft demand, there are understandable concerns about what the rise of AI will mean for opportunities for young workers. The proportion of Canadians in their 20s working in high-paying, AI-exposed occupations increased rapidly from 2015 to 2022. But some of that increase has since reversed.
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Canada’s labor market enters 2026 in a unique situation. Trends such as the rise of AI, the flogging of immigration policy, and the uncertain future of Canada-U.S. trade relations could all leave a significant mark for years to come. However, on the ground, recent experience suggests that the day-to-day functioning of the labor market may remain relatively static. If the economic outlook brightens slightly, indicators such as the unemployment rate may improve slightly. But there is little indication so far that this will be enough to start hiring to the extent of effectively reversing the jobseeker challenges that have built up in recent years.
For more information, check out Indeed’s 2026 Canadian Jobs and Hiring Trends Report.
This post was created by Indeed. Insider Studio.
