Canada’s seemingly stable jobless rate is hiding widening disparities among cities (and provinces), according to BMO Capital Markets. The bank’s latest Labour Market Performance Ranking shows job markets in Western Canada are largely improving, while Eastern Canada—Southern Ontario in particular—dominates among the worst-performing cities. The bank warns this divergence won’t be resolved any time soon, and is expected to widen.
Job Markets Are Bigger Than Just Their Unemployment Rate
BMO’s City Labour Market Performance Ranking looks at Canada’s 33 largest cities, and ranks them by 5 weighted factors:
- Population change (15% of weight),
- Employment change (30%),
- Unemployment rate (20%),
- Unemployment rate change (20%),
- Employment rate (15%)
These factors show how a market is changing, not just where it now sits. In finance, direction is more important than the current level. A high unemployment rate may look bad, but if it’s falling while growth remains strong, the economy is absorbing that growth and still improving. The reverse is telling: a city can post a low unemployment rate, but if population growth is slowing while job losses rise, the market is weakening. The rate tells you where the market has been. The velocity tells you where it’s going.
Canada Sees Job Market Divergence Return, Eastern Canada Slumps
After the initial post-pandemic boom that saw growth across all provinces, regional divergences are returning, says BMO. The bank sees Western Canada continuing to grow in the near-term, with Alberta and Saskatchewan forecast for at least 2% real GDP growth, a benefit driven by soaring oil prices and weaker exposure to tariff uncertainties.
Eastern Canada’s heavy exposure to a pricey housing downturn and population growth changes has turned into a slump. The bank is forecasting that real GDP in Ontario and Quebec will fall below the 1% national average. This has—and will continue to have—an impact on local job markets.
Source: BMO Capital Markets.
“In the job market, activity has seemingly gone quiet with employment growth up very modestly from a year ago and the jobless rate little changed. But there is churn below the surface, across industries, job types and regions. The latest Labour Force Survey results shine a clear light on the emerging regional cracks in the job market,” explains BMO Senior Economist Robert Kavcic.
Western Canada’s Job Markets Lead As Resource Economies Boom
Resource-driven economies dominate the bank’s list, largely located in the Prairies. Four out of five of the top-ranking cities are in Alberta and Saskatchewan: Calgary (#1), Saskatoon (#2), Edmonton (#3), and Regina (#4). Rounding out the list is Sudbury (#5), one of the few Ontario cities to rank towards the top of the list.
It’s worth paying attention to the surge in rank among these cities in Western Canada. Edmonton and Kelowna both surged more than 20 points in the past year, among the fastest surges.
While cities in Alberta are reporting unemployment rates just slightly below the national average, it’s the employment creation driving growth. “While combined employment across B.C., Ontario and Quebec is down 0.4% y/y, growth has accelerated to 4% y/y in Alberta,” explains Kavcic.
Canada’s Worst Job Markets Concentrated In Ontario, Toronto Included
Ontario has a few bright spots, but it disproportionately crowds the bottom of the ranks. Peterborough (#8) wasn’t just in the Top 10, but it climbed 23 spots last year, the most of any city. Brantford (#9) also jumped 17 places, and Sudbury climbed 15 places to break into the top five. These are remarkable turnarounds, and not typical of the story dominating the majority of regions in the province.
“Ontario suddenly has the highest unemployment rate outside Newfoundland & Labrador at 7.6%, near the widest (non-pandemic) gap on record relative to Canada overall (6.7%),” explains Kavcic.
That downturn is largely concentrated in real estate-heavy Southern Ontario. The province’s cities occupy 7 of the bottom 10 cities, and include: Toronto (#27), Kitchener (#29), Barrie (#30), St. Catharines (#31), Windsor (#32), and London (#33). While London is last, it does top one list: at 9.1%, the city’s unemployment rate is the highest of any city in Canada. That’s nearly 1 in 10 workers unable to find a job.
Kavcic notes “clear weakness in the manufacturing heartland—London, Windsor, St. Catharines, Barrie and Kitchener round out the bottom five.”
Employment Gap In Cities Set To Widen In Coming Months
This regional divergence is deeply tied to local industries, meaning there’s no easy or fast way to change course. Even reversing the trade-related exposure won’t be enough to reverse course in regions like Southern Ontario, where these problems have turned into structural issues. As a consequence, the bank is warning investors to “look for Canada’s regional economic cracks to widen further in the year ahead.”
Resource economies have managed to turn those jobs into revenue, allowing regional governments to operate in a lean environment. However, housing-driven, debt-fueled economies like Ontario have few cities well-suited to navigate these waters. Toronto is a prime example—a city that was seen as the center of Canada is now too expensive for young adults to afford. As a consequence, young adults are migrating to more affordable regions like Alberta. With Southern Ontario bearing the brunt of the non-permanent resident caps and ongoing trade tensions, the structural hole keeps getting deeper as the province waits for a broader economic recovery.
English (US) · 