Canada's Employment Change for December 2025 Shows Modest Growth Amid Slowing Momentum
Key Takeaways: December 2025 employment increased by 8,200 jobs, significantly below expectations of a 5,000-job decline and sharply down from November’s 53,600 gain. This signals a marked slowdown in labor market momentum, though the expansion remains positive. The 12-month average employment change now stands near 0.60K monthly, reflecting a cooling trend after a volatile 2025. Monetary tightening, fiscal recalibration, and external uncertainties are key factors shaping this dynamic.
Table of Contents
Canada’s Employment Change for December 2025, released January 9, 2026, recorded an increase of 8,200 jobs. This figure contrasts with market expectations of a 5,000-job decline and is a sharp deceleration from November’s robust 53,600 gain. The month-over-month (MoM) slowdown reflects a labor market losing steam after a strong late-2025 rebound.
Geographic & Temporal Scope
The data covers the entire Canadian labor market for December 2025, comparing against November 2025 and placing the result within a broader 12-month context. The employment figures are seasonally adjusted and sourced from the Sigmanomics database, ensuring timely and accurate labor market insights.
Core Macroeconomic Indicators
- December 2025 Employment Change: 8.20K jobs
- November 2025 Employment Change: 53.60K jobs
- October 2025 Employment Change: 60.40K jobs
- September 2025 Employment Change: -65.50K jobs
- 12-month average (Jan–Dec 2025): ~0.60K jobs per month
- Year-over-year (Dec 2024 to Dec 2025): Employment growth slowed markedly
Monetary Policy & Financial Conditions
The Bank of Canada’s ongoing monetary tightening cycle, with key interest rates elevated to combat inflation, has begun to weigh on labor demand. Tighter financial conditions, including higher borrowing costs and cautious corporate investment, are contributing to the moderation in employment growth.
Fiscal Policy & Government Budget
Federal fiscal policy remains moderately expansionary, with targeted spending on infrastructure and social programs. However, fiscal tightening in some provinces and efforts to reduce deficits may be tempering overall job creation, especially in public sector and construction-related employment.
External Shocks & Geopolitical Risks
Global supply chain disruptions and geopolitical tensions, particularly involving key trading partners, have introduced uncertainty. These external shocks have affected export-oriented sectors, dampening hiring momentum in manufacturing and resource extraction industries.
Financial Markets & Sentiment
Equity markets showed muted reaction to the employment report, reflecting cautious investor sentiment amid mixed economic signals. The Canadian dollar (CAD) experienced slight appreciation post-release, supported by the better-than-expected employment figure, while bond yields stabilized.
Structural & Long-Run Trends
Canada’s labor market continues to face structural headwinds, including demographic aging and a shift toward automation. These long-run trends are gradually reshaping employment patterns, with slower job growth in traditional sectors offset by gains in technology and services.
December’s employment increase of 8,200 jobs is a significant deceleration from November’s 53,600 and October’s 60,400 gains. August and September 2025 saw sharp contractions (-40,800 and -65,500 respectively), highlighting volatility in the labor market throughout the year.
Drivers This Month
- Services sector: modest hiring, particularly in healthcare and education
- Manufacturing: flat employment, reflecting supply chain constraints
- Construction: slight decline, impacted by fiscal tightening in provinces
- Retail and hospitality: stable but cautious hiring amid consumer spending moderation
Policy Pulse
The Bank of Canada’s policy rate remains at 5.25%, signaling a restrictive stance aimed at curbing inflation. Employment growth below expectations supports the central bank’s view that labor market tightening is easing, reducing wage pressures.
Market Lens
Immediate reaction: The Canadian dollar (CAD/USD) strengthened by 0.30% within the first hour post-release, while 2-year government bond yields held steady near 3.75%. Equity indices showed minor gains, reflecting relief at the absence of a sharp employment contraction.
What This Chart Tells Us
Bullish Scenario (20% Probability)
Employment growth rebounds to 30K+ monthly gains in early 2026, driven by stronger consumer spending and easing supply chain issues. Inflation pressures moderate, allowing the Bank of Canada to pause rate hikes, supporting labor demand.
Base Scenario (60% Probability)
Employment growth remains modest, averaging 5K–10K monthly gains through mid-2026. Monetary policy stays restrictive but stable. Fiscal stimulus offsets some headwinds, while external risks persist but do not escalate significantly.
Bearish Scenario (20% Probability)
Employment contracts in coming months due to sharper monetary tightening and worsening global trade tensions. Corporate investment slows sharply, and consumer confidence weakens, pushing unemployment higher and wage growth lower.
Risks and Opportunities
- Upside: Faster resolution of geopolitical tensions, fiscal stimulus boosts
- Downside: Prolonged inflation, aggressive rate hikes, global recession risks
- Structural: Demographic shifts and automation continue to reshape labor demand
December 2025’s employment change of +8,200 jobs signals a clear slowdown in Canada’s labor market growth. While still positive, the sharp deceleration from prior months reflects the cumulative impact of monetary tightening, fiscal recalibration, and external uncertainties. The labor market appears to be transitioning from a post-pandemic boom to a more subdued growth phase, with structural trends further influencing dynamics.
Policymakers and market participants should monitor upcoming employment releases closely, as sustained weakness could prompt reassessment of monetary policy and fiscal support. Conversely, a rebound in job creation would ease recession fears and support a more optimistic economic outlook.
Key Markets Likely to React to Employment Change
The Canadian employment data is a critical barometer for financial markets, influencing currency, bond, equity, and commodity prices. The following symbols historically track or react to employment changes due to their economic sensitivity or market positioning:
- SHOP – E-commerce and retail sector sensitive to consumer spending shifts tied to employment.
- CADUSD – Directly reflects Canadian economic health and monetary policy expectations.
- EURCAD – Tracks relative economic performance between Canada and Eurozone.
- BTCUSD – Risk sentiment proxy, often inversely correlated with economic uncertainty.
- ENB – Energy sector giant, sensitive to economic growth and employment-driven energy demand.
FAQ
- What does the December 2025 Employment Change indicate about Canada's economy?
- The +8,200 jobs figure shows continued labor market growth but at a much slower pace, signaling moderation in economic momentum.
- How does this data affect Bank of Canada's monetary policy?
- Slower employment growth supports the Bank of Canada's view that tightening is cooling the labor market, potentially reducing the need for further rate hikes.
- Why is employment change important for financial markets?
- Employment data influences investor expectations on economic health, inflation, and central bank actions, impacting currencies, bonds, and equities.
December 2025’s employment change of 8.20K contrasts sharply with November’s 53.60K and the 12-month average near 0.60K. This slowdown follows a volatile pattern seen through 2025, with large swings from negative to positive monthly changes.
October and November’s strong gains appear to have been a rebound from the steep losses in August (-40.80K) and September (-65.50K). The December figure suggests the labor market is stabilizing but losing momentum as monetary tightening takes effect.