Canada’s Unemployment Rate Hits 7% in May, Highest Since 2016 Outside Pandemic

Statistics Canada reported that Canada’s unemployment rate rose to 7% in May 2025, the highest level since 2016 outside the pandemic. The number of unemployed people reached 1.6 million, up almost 14% from a year earlier.

The economy added just 8,800 jobs in May, a figure far below what is needed to keep pace with population growth. Analysts attribute this stagnation to ongoing U.S. tariffs on Canadian steel, aluminum, and automobiles, which have slowed hiring and led to layoffs in key sectors.

The labor market faces a paradox. While full-time jobs increased by 57,700 in May, part-time positions dropped by 48,800, resulting in almost no net employment gains since January.

Wholesale and retail trade rebounded with 43,000 new jobs, but accommodation, food services, and transportation each lost 16,000 jobs. Youth unemployment surged to its highest in 26 years, with students facing a difficult summer job market.

Manufacturing hubs such as Windsor saw unemployment spike to 10.8%. Uncertainty over U.S. trade policy has made businesses hesitant to invest or hire, spreading weakness across the economy.

Canada’s GDP is expected to grow by only 1.3% in 2025, a slowdown from last year. The Bank of Canada has kept its interest rate at 2.75% but may cut rates further if unemployment continues to rise.

These developments matter because they reveal how vulnerable Canada’s economy remains to external shocks, especially trade actions from its largest partner.

As businesses pull back, workers face fewer opportunities and longer job searches. The risk of recession grows if these trends persist, making the labor market a critical indicator for Canada’s economic health.