Canadian employment growth came to a standstill in the first eight months of 2025, with no net job gains recorded from January to August, according to new Statistics Canada data released Wednesday. The employment freeze coincided with a 0.4 per cent contraction in gross domestic product during the second quarter, marking the country’s largest quarterly economic decline in nine years outside the COVID-19 pandemic period.
The dual employment and GDP setbacks reflect mounting economic pressures from ongoing trade tensions between Canada and the United States, which escalated through the first half of the year. Payroll employment also showed no net increase from January to June.
Trade tensions weigh on business activity
Exports initially supported economic growth as trade tensions escalated in the first quarter but reversed course in the second quarter. Imports and business spending on machinery and equipment both declined during the same period as US tariffs and economic uncertainty dampened business investment decisions.
Manufacturing and wholesale sectors bore the brunt of the economic contraction, according to the report. The declines came as US tariffs on Canadian steel, aluminum and automobiles took effect during the second quarter.
Uncertainty around trade relations affected hiring intentions across the economy, though layoff rates remained similar to 2024 levels. The stagnant employment picture presents workforce planning challenges for HR leaders navigating an uncertain economic environment.
Inflation eases below two per cent
Headline consumer inflation fell below two per cent from April to August, driven largely by the removal of the consumer carbon levy. Excluding energy prices, annual consumer price growth averaged 2.7 per cent during the five-month period.
Workers in export-dependent industries face steep earnings losses
A separate Statistics Canada study examining workers laid off from industries dependent on US demand for Canadian exports found that about 70 per cent found paid employment within a year of job loss during the 2013-to-2016 period. However, these workers experienced significant financial setbacks.
Men laid off from US-dependent export industries saw earnings drop 42 per cent in the year following job loss compared with two years before the layoff. Women experienced a 50 per cent earnings decline. These losses exceeded those of workers laid off from other industries, who saw relative earnings decreases of 32 per cent for men and 37 per cent for women.
About 69 per cent of re-employed men and 76 per cent of re-employed women from these industries transitioned to different sectors. The historical data could inform strategies for workers potentially affected by current tariff increases, though the full impact remains unknown.
Credential recognition gaps persist for immigrant nurses
Statistics Canada also released data showing significant skill underutilization among internationally educated nurses. According to 2021 Census data, about half of immigrant women nurses from Korean, Japanese and Chinese population groups had health occupations, meaning the other half worked in jobs that made no use of their nursing education.
IENs from other population groups fared better, with 62 per cent of those from Latin American backgrounds to 83 per cent of Black nurses working in health occupations. Even within health occupations, only 35 to 62 per cent of IENs held jobs matching their education level, depending on population group.
Better credential recognition could help ease nursing shortages while preventing deskilling among immigrant nurses in low-skill positions, according to the study.
Student flows between Canada and US shift
The number of US citizens holding Canadian study permits for undergraduate or graduate programs increased from about 5,000 in 2000 to 11,000 in 2019, before declining to around 10,000 in the early 2020s. Meanwhile, Canadian undergraduate and graduate students enrolled in US institutions have fluctuated between 21,500 and 27,400 annually since the early 2000s.
About 65 per cent of Canadian students returned home after studying in the United States around 2021, compared with about 50 per cent a decade earlier.
