Will hiring intentions translate into new jobs?

Key Concepts

• Low Hire, Low Fire: A labor market state characterized by stagnant hiring activity alongside minimal layoffs.
• Break-even Employment: The level of job growth required to keep the unemployment rate stable, currently influenced by shifting immigration and demographic trends.
• Cyclical vs. Structural Trends: The distinction between temporary economic headwinds (e.g., oil prices, trade policy) and long-term shifts (e.g., AI integration, aging population, immigration slowdown).
• Input Costs: Expenses incurred by businesses to produce goods or services, currently pressured by rising gasoline prices.

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1. Current State of the Canadian Labor Market

Between January and April 2026, Canada experienced its most significant employment decline since 2021, losing over 100,000 jobs. Despite these "gloomy" headline figures, Claire Fan (Senior Economist at RBC) notes that the underlying data suggests a period of stabilization rather than a collapse.

• The "Low Hire, Low Fire" Dynamic: The rise in the unemployment rate is primarily driven by a lack of new job creation for labor market entrants (graduates and those returning to the workforce) rather than mass layoffs. Layoff numbers have been trending downward since October 2025.
• Sectoral Soft Spots: While aggregate layoffs are low, specific sectors exposed to U.S. trade policies—notably auto manufacturing and aluminum production—are experiencing actual job losses.

2. Factors Influencing Hiring Stagnation

Businesses are currently hesitant to convert hiring intentions into actual job growth due to several external and internal pressures:

• External Uncertainty: Persistent volatility in the global trading environment creates a cautious atmosphere for corporate investment.
• Rising Input Costs: Since late February 2026, increased gasoline prices have significantly raised operational costs, forcing businesses to hold back on expansion.
• Technological Integration (AI): Businesses are currently evaluating the productivity gains offered by AI. This uncertainty regarding how AI will impact future labor needs is contributing to the "soft hiring demand," particularly for entry-level and youth positions.

3. Demographic and Supply-Side Shifts

A critical structural change is occurring on the supply side of the labor market:

• Immigration Slowdown: A reduction in immigration—which historically provides a steady stream of younger workers—is causing the labor force to shrink and age.
• Future Constraints: Fan warns that when demand eventually picks up, there may be a shortage of experienced workers to replace those retiring, as the pipeline of new, younger labor is currently constrained.

4. Economic Outlook and Forecasts

Despite the current headwinds, RBC maintains a "cautiously optimistic" outlook based on the resilience of domestic consumer spending.

• Key Indicators to Watch: Economists are monitoring job postings and upcoming job vacancy data as leading indicators for supply-demand dynamics.
• The Unemployment Rate: Fan emphasizes that the unemployment rate is a more reliable metric than headline employment counts, as it is less distorted by structural demographic changes.
• Forecast: RBC’s base case is for the unemployment rate to trend toward 6.3% by the end of 2026. However, Fan notes that risks remain skewed to the downside, heavily dependent on the trajectory of Middle East conflicts, gasoline prices, and their subsequent impact on household demand.

5. Synthesis

The Canadian labor market is currently in a state of transition. While the headline loss of 100,000 jobs appears negative, the market is fundamentally defined by a "wait-and-see" approach from businesses. The combination of external trade pressures, rising energy costs, and the integration of AI has created a temporary hiring freeze. The long-term challenge, however, lies in structural demographic shifts—specifically the slowing of immigration—which may lead to labor shortages once economic stability returns. The path forward depends on whether domestic demand remains resilient enough to bridge the gap between current hiring intentions and actual job growth.