OECD Employment Outlook 2026: Canada
Table of contents
This country note provides an overview of the labour market situation in each country based on data from OECD Employment Outlook 2026. This edition has a special focus on geographic disparities in jobs and incomes.
The OECD labour market remains resilient, with employment and labour force participation rates at record highs (72.1 and 76.7% in Q1 2026 on average across countries, respectively) and unemployment low by historical standards (4.9% in May 2026). However, there are increasing signs of weakening, including rising unemployment in many countries, slowing employment growth, and easing labour shortages. Due to the new surge in energy prices, real wages are expected to fall in many countries.
The unemployment rate stood at 6.6% in May 2026, up from 5.2% in May 2023 and above the OECD average of 4.9%. The employment rate among the working-age population remained high at 74.3% in the first quarter of 2026.
Young labour market entrants have been increasingly exposed to unemployment relative to the rest of the working-age population. In Q1 2026, the unemployment gap between recent non-college graduates and non-enrolled persons remains elevated at 4 percentage points (p.p.), although still below EU levels. The unemployment gap for college graduates was around 1.1 p.p. in early 2026, well above both Australia and the EU, where the gap is close to zero.
Labour market tightness is now below pre‑COVID‑19 levels. In Q1 2026, the number of vacancies per unemployed person stood at 0.3, below its pre-pandemic level of 0.5 in Q4 2019 and far below its pandemic peak of 0.9 in Q2 2022. This indicates an easing of labour market conditions.
Real wages grew by 1.5% year‑on‑year in Q1 2026, broadly in line with the OECD average increase of 1.7%. They have returned to their Q1 2021 level, indicating a full recovery following the surge in energy prices. Looking ahead, real wages are projected to decline by 0.7% in 2026, before returning to moderate growth of 0.4% in 2027, under the assumption that disruptions stemming from the conflict in the Middle East are sizeable but temporary. The real minimum wage declined between January 2025 and January 2026, with Canada being among the six countries that recorded a decrease over this period.
Regional disparities in labour market outcomes are large across the OECD. In over half of OECD countries, employment rates across small regions vary by more than 20 p.p. These disparities do not simply reflect differences in who lives where, but also in the economic opportunities that regions have to offer, and they translate directly into disparities in living standards.
In Canada, regional disparities in employment rates are among the largest among OECD economies: the gap in employment rates between regions in the top and bottom quintiles stands at 17.4 p.p., compared to an average of 11.4 p.p. across OECD countries where data are available.
People’s chances of finding work are strongly shaped by where they live. In 2021, the latest year for which data are available at such granular geographical scale, the unemployment rate in the worst-performing census division, Division No. 9 in Newfoundland, stood at 29%, nine times higher than that of the best-performing one, Nicolet-Yamaska (3.3%).
Regional labour market disparities translate into significant income differences across Canada. The median disposable income in the highest-income region, Division 16 in Alberta, is three times that of the lowest-income one, Division 4 in Newfoundland and Labrador; much of this gap reflects differences in labour market conditions.
Globalisation and digital technologies continue to reshape local labour markets across OECD countries, but the effects differ substantially across regions. Areas highly exposed to import competition from low-wage countries often face persistent manufacturing job losses, while regions exposed to digital technologies tend to experience stronger growth in non-routine and higher-skilled employment.
Regional exposure to import competition from low-wage countries, driven by China’s accession to the WTO in 2001 and EU enlargement to Central and Eastern European countries between 2004 and 2007, varies strongly across countries.
In Canada, the decline in manufacturing employment associated with imports from low-wage countries is relatively small compared to other countries such as the United States: a one standard deviation increase in exposure to import competition reduces manufacturing employment by 4% in Canada, compared to 15% in the United States. However, when expressed as a share of the overall decline in manufacturing employment between 2001 and 2018, import competition from low-wage countries accounted for about 20% of the reduction.
As in other countries, most of the adjustment occurs through workers exiting employment (−2.07% of initial manufacturing employment) rather than transitioning to other jobs. By contrast, industry mobility (−1.46%) and regional mobility (−0.34%) play a much smaller role. The decline in manufacturing employment at regional level associated with a one standard deviation increase in exposure to import competition was not offset by stronger employment growth in non-manufacturing sectors. One possible explanation is that many affected regions remained relatively specialized, which reduced their ability to generate sufficient employment growth in other sectors.
Non-compete clauses – contract terms that prevent workers from moving to a competitor or starting a competing business – and related contractual restrictions are widespread across OECD labour markets. They covered about 30% of workers in 2025, and are increasingly used beyond highly specialised jobs. While firms may use such clauses to protect trade secrets or investments, evidence suggests they can reduce job mobility, weaken wage growth, slow knowledge diffusion and undermine productivity growth.
In Canada, according to a survey of employers, between 29% and 39% of private‑sector employees are currently bound by a non-compete agreement compared to 20% to 30% on average across the OECD countries. Moreover, there is an upward trend in non-compete clauses, as reported by employers.
In Canada as in several other OECD countries, non-compete clauses have spread into parts of the labour market where the traditional justification – protecting sensitive information or high-value investments – appears weak: between 13% and 25% of workers with no access to confidential information nonetheless declare having signed a non-compete as well as between 15% and 26% of low-pay workers.
In addition, about 40% of surveyed firms report knowledge of either no-poaching, wage‑fixing, or both occurring within their industry compared to 48% on average across the surveyed countries.
Contact
Marcela VESELKOVA (✉ marcela.veselkova@oecd.org)
Theodora XENOGIANI (✉ theodora.xenogiani@oecd.org)
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The full book is available in English: OECD (2026), OECD Employment Outlook 2026: Geographic Disparities in Jobs and Incomes, OECD Publishing, Paris, https://doi.org/10.1787/7e710f54-en.
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