Canada Wage Growth Expected Amid Slowing Immigration, Tight Labour Market

Canada's labour market in 2025 has remained resilient despite ongoing trade tensions with the United States, but a slowing pace of immigration is leading to a tighter labour market and increased competition for talent. For the first time in over two years, employment growth has outpaced labour force growth, signaling potential labour shortages ahead. The Conference Board of Canada projects the unemployment rate will decline from 7% in May 2025 to 6.2% in 2026 and 5.8% in 2027. This shift is expected to drive wages higher, with average hourly wages already rising by 3.4% year-over-year in May, outpacing inflation. Businesses are anticipated to rely more heavily on the existing domestic labour pool, which will intensify competition for workers and accelerate wage growth. Despite these labour market changes, economic growth is forecast to be modest at 1.5% in 2025, with hiring demand remaining muted due to ongoing trade uncertainties.