Canada’s labour market is shifting in alarming ways just as new pressures build on the broader economy. Job vacancies have plunged to an eight-year low even as the nation confronts mounting layoffs, rising unemployment, and a surge in population that strains capacity. The combination of these forces is darkening the outlook—and the possibility of recession is no longer remote.

By July, the number of open positions had dipped below 470,000, putting the vacancy rate at 2.6 percent. At the same time, the unemployment rate climbed to 7.1 percent in August. The Canadian economy itself shed 66,000 jobs in August alone, a startling reversal after years of tight labour markets. The contraction in labour demand has hit technology and retail especially hard, and other service sectors such as arts, marketing, and personal care are also showing signs of fragility.

Major announcements this week sharpen the warning signs. Imperial Oil revealed it would eliminate around 900 corporate and head office jobs—most in Calgary—as part of a sweeping restructuring that will cut about 20 percent of its workforce by 2027. This marks yet another chapter in the oil and gas sector’s steady erosion amid low prices and technological disruption. Separately, General Motors faces internal upheaval, with 2,000 Canadian workers bracing for cuts starting in 2026. The manufacturing footprint is under strain, just as the energy industry sheds roles.

These losses compound the broader pattern: since early 2023, Canada’s national employment rate has dropped by two percentage points—a decline greater than what many past recessions recorded. The working-age population between 25 and 54 years old has also seen deterioration in labour force participation. Some 55 percent of industries in payroll data are contracting simultaneously, a breadth of weakness normally seen during recessions. Real GDP contracted in the second quarter, and labour productivity fell more sharply than in recent history. Analysts now project tepid growth ahead, leaving Canada perilously close to two consecutive quarters of negative real output—often taken as the threshold for a technical recession.

At the same time, Canada’s population continues to expand, largely driven by immigration even as federal policy shifts threaten to strangle growth. Until recently, high levels of inbound migration helped absorb slack in the labour market and support demand for consumption and housing. But the government’s decision to sharply reduce immigration targets exposes a tension: fewer newcomers may relieve pressure on services and infrastructure, but will also shrink the labour supply over time. Critics warn that the cuts could stall economic momentum, especially in regions and sectors dependent on newcomers for staffing.

The pressure is compounded by a trend of labour “leakage” — Canadians with experience and skills are responding to weak job prospects by shifting industries, exiting the workforce, or abandoning high-cost regions. Provinces such as Alberta offer rare counterpoints, with employment growth persistently outpacing national averages. But this regional variation may deepen inequality and uneven recovery.

For younger Canadians, the fallout is especially stark. Employment among 15- to 24-year-olds has fallen to around 53.6 percent over the summer—its lowest level outside pandemic periods since the 1990s. Many recent graduates now find their first career steps delayed or derailed by soft demand. The hit to youth employment accounts for a disproportionate share of the recent increase in unemployment.

Taken together, this portrait suggests an economy under stress at multiple margins. The slide in vacancies, the wave of layoffs in energy and manufacturing, the job losses in recent months, and the tension over immigration all raise the spectre of recession—not as distant threat but as real possibility. Canada’s leaders now face an acute challenge: whether they can arrest the deterioration in labour demand and reconcile population policy with economic resilience before the downturn gathers pace.