Canada Loses 41,000 Jobs in July as Youth Employment Falls to 27-Year Low
Canada’s Employment Crossroads: When Summer Jobs Disappear
As 41,000 jobs vanish in July, young Canadians face their worst employment crisis in decades—exposing deeper cracks in the country’s post-pandemic economy.
TORONTO — The latest jobs report landed like a cold gust in the height of summer: Canada lost 41,000 jobs in July. But behind that headline figure lies a far more troubling shift—one that signals a fundamental change in the nation’s economic landscape.
Youth employment, in particular, has taken a dramatic hit. The employment rate for Canadians aged 15 to 24 has fallen to just 53.6%, the lowest it’s been since 1998 outside of the pandemic. With 34,000 young people missing out on the summer jobs that often bridge school and full-time work, a long-standing path to economic mobility is eroding.
Though the national unemployment rate held steady at 6.9%, it tells only part of the story. Of the 1.6 million Canadians currently job hunting, nearly one in four—23.8%—have been unemployed for over six months. That’s the highest proportion of long-term joblessness in more than two decades.
Trade Tensions Cast a Long Shadow
Beneath the surface of July’s job losses lies a more complex story: shifting trade dynamics, particularly persistent U.S. tariffs, have altered the landscape for Canadian manufacturing. These tensions have created a kind of “shadow economy”—where companies hesitate to invest or hire due to ongoing uncertainty.
Canada’s manufacturing sector has now contracted for six straight months, according to the S&P Global Canada Manufacturing PMI. Employment within the sector is shrinking, with key indexes holding at 46.2—well below growth territory. This isn’t just a temporary slowdown. It’s a sign of structural change in Canada’s industrial economy.
Yet, despite the gloom, there are signs of resilience. Manufacturing added 5,300 jobs in July, marking its second monthly gain. Transportation and warehousing were standout performers, adding 26,000 positions—the sector’s first increase since January—fueled by strong U.S. demand for Canadian exports.
“The manufacturing uptick hints at stabilization in certain subsectors,” one industry analyst noted. “But year-over-year, the sector is still down 9,400 jobs. What we’re seeing is selective adaptation—not a full recovery.”
Private Sector Pullback Deepens
July’s job losses were concentrated almost entirely in the private sector, which shed 51,000 full-time roles. This sharp pullback points to growing unease among businesses as they grapple with regulatory uncertainty and economic headwinds.
The hardest-hit areas? Information, culture, and recreation, which lost 29,000 positions, and construction, down 22,000. These are sectors that usually thrive in summer—making their declines especially alarming.
The construction sector’s slump is particularly worrisome. Traditionally, it has absorbed large numbers of young workers during peak building season. Its downturn, combined with the drop in youth employment, signals a breakdown in familiar seasonal hiring patterns.
A Delicate Balancing Act for Monetary Policy
Wage growth added another layer of complexity. Average hourly earnings rose 3.3% in July—enough to keep inflation concerns on the table even as job growth falters.
Investors and analysts are closely watching the Bank of Canada. The odds of a 25-basis-point interest rate cut at its September meeting have risen to around 21%, up from virtually zero just weeks ago. But with core inflation still running at 3.1%, policymakers are caught between supporting job growth and keeping prices in check.
“The economy is sluggish and growth prospects remain limited,” one market strategist explained. “This data supports the case for a rate cut—but wage pressures may delay any immediate action.”
What It Means for Investors
For investors, July’s jobs report signals a potential turning point. The rare combination of weakening employment and rising wages calls for a more strategic approach to portfolio management.
Transportation and warehousing, buoyed by demand from U.S. trade partners, may present compelling opportunities for those seeking exposure to cross-border commerce. Manufacturing—though still under pressure—offers potential in companies that have successfully adjusted to new trade dynamics.
At the same time, the Canadian dollar may face additional downward pressure. If the labor market continues to weaken while the U.S. Federal Reserve holds its dovish course, investors may need to consider hedging CAD exposure or planning for diverging interest rate paths.
Construction, despite its struggles, isn’t without opportunity. While residential projects are cooling, infrastructure and industrial builds—especially those linked to exports—may benefit from sustained trade activity.
The Bigger Picture: A Long-Term Labor Challenge
Perhaps the most troubling trend is the rise in long-term unemployment. Not seen at these levels since the 1990s, it suggests a growing mismatch between available skills and the needs of employers—a disconnect that could persist long after any economic rebound.
The collapse in youth employment is especially concerning. Young workers are typically a flexible, vital part of the labor force, driving consumption and supporting economic expansion. Their absence could have long-term implications—from delayed household formation to reduced consumer spending and slower productivity growth.
For investors, this shift could serve as a leading indicator of deeper demographic and economic changes. Sectors that rely heavily on youth labor and spending—like retail and hospitality—may face prolonged challenges beyond typical business cycles.
Looking Ahead: Navigating the Transition
Canada appears to be entering a new phase of economic transition—one defined less by broad growth or decline, and more by sector-specific reallocation. In this environment, success will hinge on identifying industries that are adapting to new trade realities, while steering clear of those reliant on outdated employment models.
Targeted government intervention is likely, particularly programs aimed at addressing youth unemployment and workforce skill gaps. These efforts could unlock new investment opportunities in areas such as education technology, training platforms, and companies positioned to benefit from employment incentives.
The road ahead will be shaped by the interplay between fiscal stimulus, monetary policy, and evolving labor dynamics. For investors, this means rethinking strategies, remaining flexible, and focusing on the sectors and companies best equipped to thrive in Canada’s changing economic environment.
As always, investment decisions should be grounded in thorough research and professional guidance. Economic conditions are fluid, and the road forward may look very different from the one behind.
Fact Sheet
| Category | Details |
|---|---|
| Job Losses (July) | - Total: 41,000 jobs lost - Full-time: 51,000 lost - Private sector: Majority of losses - Youth (15-24): 34,000 lost (employment rate: 53.6%, lowest since Nov 1998 excluding COVID) |
| Unemployment Rate | Held steady at 6.9% (number of job seekers unchanged from June) |
| Sectoral Breakdown | - Losses: Information/culture/recreation (-29,000), construction (-22,000) - Gains: Transportation/warehousing (+26,000), manufacturing (+5,300; still down 9,400 YoY) |
| Long-Term Unemployment | 23.8% of 1.6M unemployed (27+ weeks jobless; highest since Feb 1998 excluding COVID) |
| Wage Growth | Average hourly wages up 3.3% YoY (slight increase from June) |
| Layoff Rate | 1.1% (unchanged YoY despite trade/tariff uncertainty) |
| Contextual Factors | - June had unexpected gain of 83,000 jobs (July partially offsets this) - U.S. tariffs impacting export-sensitive sectors (e.g., manufacturing PMI contracted for 6 months) - Youth labor surplus |
| Expert Views | - TD Securities: Correction after June surge, not a decline trend - BMO: Tariffs pose ongoing risk - RBC: Predicts modest growth, no recession |
| Policy Implications | - 30% chance of BoC rate cut in September - Fiscal measures (e.g., youth job programs) likely - Urgency for U.S. trade negotiations |
| Forward Indicators | Manufacturing PMI, job vacancy ratio, BoC hiring intentions, migration flows, payroll tax data |
| Investment Thesis | |
| Section | Key Points |
| ------------- | ---------------- |
| Executive View | First evidence of labour market downturn |
| Drivers of Weakness | Tariff shock, post-June correction, youth labour surge, sticky wages |
| Policy & Macro Set-Up | BoC likely to hold, fiscal support expected |
| Cross-Asset Implications & Trade Sheet | Strategic biases and trades |
| Scenarios (2025-Q4) | Base, upside, downside outcomes |
| Forward Indicators | Key metrics to watch |
| Bottom Line | Not recessionary yet, strategic positioning advised |