Job Creation Falls Behind Rapid Population Growth

March 11, 2025 – Canada’s labour market faces mounting pressures that cannot be fixed merely by adding more workers, according to a new report from the C.D. Howe Institute.

In the inaugural “2024 Labour Market Review: Challenges, Trends, and Policy Solutions for Canada,” authors Parisa Mahboubi and Tingting Zhang find that the rising unemployment rate in 2024 is primarily driven by a mismatch between labour force expansion and job creation rather than a decline in labour demand. Ongoing challenges like sectoral labour shortages, regional disparities, and declining productivity also persist.

The report makes the case for enhancing labour market outcomes, particularly for seniors and immigrants, by proposing measures such as raising the retirement age, improving training programs, easing labour mobility barriers, and streamlining credential recognition for skilled immigrants.

“Job creation has continued, but the labour force is growing even faster, pushing up the unemployment rate,” says Mahboubi. “While this does not necessarily signal weaker labour demand, it underscores the challenge of integrating a rapidly expanding workforce. Addressing skills mismatches and improving the recognition of immigrants’ qualifications will help ensure more workers transition smoothly into jobs that match their expertise.”

The report finds that many older Canadians still retire earlier than their counterparts in some Organisation for Economic Co-operation and Development (OECD) countries, while immigrants often face barriers to having their foreign qualifications recognized, limiting their ability to meet labour needs and contributing to underemployment. At the same time, Canada is experiencing a decline in labour productivity, driven by several factors such as stagnant capital investment and slow adoption of automation, heavy reliance on temporary foreign workers for low-wage jobs, an expanding public sector with lower productivity, and shifts in the makeup of industries.

“Gradually raising the retirement age from 65 to 67, expanding access to high-quality training programs, and accelerating technological adoption would help address Canada’s aging workforce challenges,” Zhang says.

The report urges all levels of government to coordinate practical policies such as promoting flexible work options to extend seniors’ participation in the workforce, streamlining professional licensing, and enhancing settlement strategies for immigrants — including workplace-specific language training — and supporting businesses in adopting productivity-enhancing technologies.

“We cannot afford to leave talent on the sidelines – whether it’s older workers retiring too soon or immigrants struggling to use their skills,” Mahboubi explains. “The Atlantic provinces, in particular, face some of the country’s most acute demographic challenges, with rapidly aging populations, lower workforce participation among seniors, high unemployment, and labour mismatches compounding regional disparities. If we don’t act now, these gaps will only widen.”

Read the Full Report

For more information, contact: Parisa Mahboubi, Senior Policy Analyst, C.D. Howe Institute; Tingting Zhang, Junior Policy Analyst, C.D. Howe Institute; Percy Sherwood, Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.