What Canada's labor market data suggests about hiring in 2026

Sometimes the recent past is a useful guide for what to expect in the future. Many of the themes that defined the Canadian labour market in 2025 have been in place since at least 2022, and it's a safe bet that many will continue into 2026. Still, more recent, fast-moving trends related to trade, immigration, and the new AI era will also leave their marks on the year ahead.

The labour market was soft but fairly stable amid a tumultuous 2025 for the Canadian economy. These developments filtered into employer demand, although the response wasn't dramatic: the job vacancy rate fell from 3.1% in Q3 2024 to 2.8% in Q3 2025, a shallower decline than the prior year's drop (4.0% to 3.1%). Stable job postings on Indeed between September and November 2025 suggest little change in job opportunities since.

The unemployment rate in 2025 wasn't particularly sensitive to the further dip in demand either. The jobless rate rose from 6.6% in mid-2024 to a 7.0% average in Q3 but fell back to 6.5% in November. Recent economic forecasts suggest the prospect for modest improvement heading into 2026. While not especially strong, the projected pace of GDP growth will likely exceed expected population growth and be sufficient for the unemployment rate to edge lower and the job vacancy rate to stabilize. Yet at the same time, it is unclear if this growth will be sufficient to meaningfully reverse the negative trends that have impacted job seekers in recent years.

While labour markets have softened across Canada since 2022, strength heading into 2026 varies substantially across provinces. Ontario is struggling not only is the province's unemployment rate among the highest in Canada, averaging 7.6% over the three months through November, it has also experienced the largest increase since late 2019. B.C. has also experienced an outsized increase, but from a lower starting point. Conversely, Quebec is faring well, its recent 5.4% unemployment rate the lowest in Canada.

These trends have also made Quebec job seekers more optimistic about their job-finding prospects going forward. Indeed Hiring Lab's 2025 Workforce Insights Survey asked respondents actively looking for work to rate how confident they were that they could find a new job within the next month. Just 28% of respondents from Quebec said they disagreed with the statement that they were confident in finding work quickly, compared to 34% of respondents Canada-wide. While the overall Canadian labour market might stabilize in 2026, it appears that regional differences in conditions will persist.

Meanwhile, several industries standout, both positively and negatively, compared to the relatively steady headline trends. Between Q3 2024 and Q3 2025, payroll employment fell fastest at motor vehicle parts manufacturers, a leading casualty of the trade war, with payrolls down almost 7% year-over-year. Many of the next-largest declines were concentrated in sectors sensitive to other policy changes: declining international student enrollment led to falling employment at community colleges, and the ranks of the federal public service shrank after earlier rapid growth.

On the flip side, several of the industries that expanded fastest in 2025 were areas of the economy that had already grown substantially in recent years, trends which could continue into the year ahead. Jobs in warehousing and storing, as well as couriers and messengers, rose at a solid year-over-year pace, a sign that the infrastructure underpinning the "on-demand" economy continued to grow. The same was true in social assistance (mainly childcare facilities) and ambulatory health services (e.g., clinics), supported by public funding and demographic shifts.

Although trends impacting labour demand often drive industry-specific dynamics, changes in labour supply could also play a role in the year ahead, particularly with the prospect that population growth could turn negative in 2026. In mid-2025, year-over-year population growth hit its slowest rate (outside of the pandemic) since 2016. The swing in Canadian immigration policy driving these trends could be even more significant in 2026. The ranks of non-permanent residents (NPRs) as a share of the total population slipped from a peak of 7.6% in late 2024 to 6.8% by late 2025, as inflows of newcomers have slowed since early 2024 while outflows tripled.

The pace of outflows will be the main driver of both near-term population growth and its labour market impacts going forward. Elevated youth unemployment suggests backfilling some of these vacated positions won't be particularly difficult, especially outside of less-populated regions. Still, the large number of people on post-graduate work permits who are working across the economy with an uncertain future in Canada is going to create challenges for these workers and their employers alike in 2026.

Zooming out, AI's presence in the labour market is rising, but the effects are less certain.Our 2025 Workforce Insights Survey found that 29% of Canadian workers reported using some form of artificial intelligence at work multiple times per week, on par with workers in several other advanced economies, including the US. The rate at which employers mention AI in job postings on Indeed has also surged to 5.9% of Canadian job postings in November 2025.

That said, job postings trends in some of the sectors where AI is used most have been relatively weak in recent years. How much the weakness in hiring appetite for the most AI-vulnerable occupations reflects the impact of the technology itself is difficult to pinpoint, in part because the divergence in posting trends with other occupations mainly occurred between the six months prior to, and after the public arrival of ChatGPT in late 2022. Since mid-2023, postings across the board have evolved similarly and were relatively stable in 2025, despite AI adoption generally ramping up during the period.

Regardless of the specific drivers of the soft demand, there's an understandable concern over what the rise of AI means for opportunities for young workers. The share of Canadians in their 20s working in high-paying, AI-exposed occupations grew rapidly between 2015 and 2022 among Canadians in their twenties. But a portion of that increase has reversed since.

The Canadian labour market enters 2026 in a unique situation. Trends including the rise of AI, the whiplash in immigration policy, and the uncertain future of Canada-US trade relations all could leave substantial marks for years to come. And yet on the ground, recent experience suggests the day-to-day functioning of the labour market could remain relatively static. A slightly brighter economic outlook could drive some modest improvement in metrics like the unemployment rate. But there's little sign so far that this will be sufficient to kick-start hiring to a degree that will substantially reverse the job seeker challenges that have accumulated in recent years.

This post was created by Indeed with Insider Studios.

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