Job market posts worst loss of 2025 as unemployment hits 7.1%
Canada’s labour market took a sharp downturn in August, with employment falling by 66,000—marking the largest monthly drop so far in 2025.
The unemployment rate rose to 7.1%, its highest level this cycle, after hovering around 6.9% since late last year, says Statistics Canada’s Labour Force Survey (LFS).
The employment rate also slipped to 60.5%, extending a downward trend that began in January.
“A bad miss,” says Indeed Canada senior economist Brendon Bernard.
“While the Canadian job numbers have been quite volatile this year, other drops, including July's, had often followed strong gains, helping keep the broader trend steady. This August was different. Employment posted its worst loss of the year, pushing the unemployment rate up to 7.1%, the highest it’s reached this cycle, after lingering around 6.9% since late 2024. Hours worked were flat, in part because job losses were concentrated in part-time roles.”
Breakdown of job numbers
The August decline was driven mainly by a steep reduction in part-time jobs (down 60,000, or 1.5%), while full-time employment was little changed. Self-employment accounted for over half the net decline, falling by 43,000, and both private and public sector employment also slipped, says Ottawa.
Core-aged adults (25 to 54) bore the brunt of job losses, with men losing 58,000 jobs and women 35,000. The employment rate for core-aged men dropped to 85.8%, the lowest since 2017 (excluding the pandemic), while core-aged women’s rate fell to 79.5%.
The unemployment rate for returning students stood at 16.9% in August, with the summer average at 17.9%—the highest since 2009, excluding the pandemic. The youth unemployment rate remained high at 14.5%.
“The August numbers are the clearest signal that the job market has stalled,” says Bernard.
“The number of people working is down slightly since the start of the year, while the population, according to the LFS, is up.”
Trade-exposed industries suffered significant setbacks. Manufacturing lost 19,000 jobs, transportation and warehousing dropped 23,000, and professional, scientific and technical services fell by 26,000. Construction was a rare bright spot, adding 17,000 jobs.
As Canadian students return to classrooms this fall, the federal government is rolling out a suite of new measures to help young people access education and launch their careers.
Regional declines and rising unemployment
Several provinces experienced notable employment declines. Ontario lost 26,000 jobs, British Columbia 16,000, and Alberta 14,000. Alberta’s unemployment rate jumped to 8.4%, its highest since 2017, while British Columbia’s rose to 6.2%. Ontario’s unemployment rate edged down to 7.7% as fewer people searched for work. Quebec’s job numbers held steady, but its unemployment rate rose to 6.0% as more people entered the labour force, says Statistics Canada.
Other provinces, including New Brunswick, Manitoba, and Newfoundland and Labrador, also saw declines, while Prince Edward Island recorded a modest gain.
Windsor, Oshawa, and Toronto posted the highest unemployment rates among major metropolitan areas, with Windsor’s rate jumping to 11.1%—a sign of the ongoing impact of trade disruptions.
“While some of this weakness represents the trade war’s shock to the system, evident in the jump in Windsor-area unemployment, other challenges facing the Canadian labour market - like the difficulty of finding new work among those unemployed - have continued to build off of last year’s trends,” says Bernard.
Underemployment and job search challenges
Total hours worked were flat in August, and underemployment remains a concern. About 8.8% of workers wanted more hours, with rates highest among part-timers (23.0%).
Underemployment was most prevalent in Newfoundland and Labrador (11.3%), Ontario (9.6%), and Alberta (9.4%). Those seeking more hours most often cited covering current expenses as their main reason.
The number of unemployed people reached 1.6 million, and the layoff rate edged up to 1.0%. Only 15.2% of those unemployed in July found work in August, well below pre-pandemic averages.
