Unemployment rises to 6.8% as hiring lags labour-force growth
Canada added 8,200 jobs in December, but labour-force growth outpaced hiring. Unemployment climbed to 6.8% and wage growth cooled to 3.7% year over year.
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By Torontoer Staff
Canada's unemployment rate climbed to 6.8% in December as job creation failed to keep pace with a sharp rebound in the labour force. Employers added a net 8,200 positions, while the number of people employed or looking for work rose by about 81,000, pushing participation to 65.4%.
Wage growth slowed to 3.7% year over year for permanent employees, down from 4.0% the month before, though it still exceeds annual consumer price inflation. The mix of job changes was uneven, with full-time employment up and part-time work down.
What the numbers show
December marked the first increase in the unemployment rate since August, when it reached 7.1%, the highest level outside the pandemic since 2016. The 0.3 percentage point rise in December reversed about half of the decline recorded over the previous two months.
Full-time employment rose by 50,200, while part-time positions fell by about 40,000. Gains were concentrated among the self-employed, with little net movement in private or public sector payrolls. Calculated under U.S. Labour Department methodology, Canada's unemployment rate would be 5.7%.
Today’s data demonstrate that the sharp move lower in unemployment during the preceding month was partly flattered by a decline in labor-force participation.
Andrew Grantham, senior economist, CIBC Capital Markets
Wages, households and job seekers
Wage growth has moderated from earlier in 2025 but remains above inflation, leaving some room for consumer spending to support the economy. For job seekers, the market is uneven and likely to stay choppy as slack is gradually absorbed.
- Competition for available positions has increased as more people return to the labour force.
- Full-time opportunities improved in December, but declines in part-time work removed some of the month’s gains.
- Self-employment accounted for a meaningful share of new work, which may matter for benefits and income stability.
- Wage growth is slowing, but still outpaces inflation, offering modest real income gains for some workers.
Small businesses and employers
The Canadian Federation of Independent Business reported a rise in small-business optimism to a year-long high in December. Despite that uptick, more than half of firms still cite insufficient demand, and staffing plans remain weak as more businesses plan to cut full-time roles than add them.
The labour market has been affected by trade uncertainty and tariffs from the United States, which have dampened hiring intentions. Layoff rates for 2025 stayed near historical norms, but several economists expect continued weakness in early 2026.
Outlook for 2026
Most forecasters expect a modest recovery, but they also warn that the pace will be uneven. Some predict layoffs will rise if demand remains weak, which would push underemployment back above 7 percent. Others anticipate gradual improvement as slack is absorbed.
Rather than signaling a setback, December’s modest employment gain and rising unemployment rate reinforce our view that Canada’s labour market recovery is under way, but will likely prove choppy, with slack absorbed only gradually over time.
Claire Fan, senior economist, Royal Bank of Canada
- Unemployment rate: 6.8%
- Net jobs added: 8,200
- Labour force increase: ~81,000
- Participation rate: 65.4%
- Full-time jobs: +50,200
- Part-time jobs: -40,000
- Wage growth, permanent employees: 3.7% year over year
The Bank of Canada expects modest growth ahead, and policymakers have signalled that after recent rate cuts the threshold for further easing is high. Consumers and job seekers should watch monthly labour reports, wage trends, and central bank commentary for signs of momentum.
December’s data underline that the recovery will not be steady. Hiring is proceeding, but at a rate that leaves room for slack and intermittent setbacks. Households and small businesses should plan for continued uncertainty while monitoring labour and inflation developments in the months ahead.
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