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Earlier this week, we marked another Labour Day, and Canada’s job market is losing steam. The slowdown is occurring against the backdrop of unprecedented tariff hikes, persistent geopolitical tensions, and a stagnant Canadian economy. Nationally, employment fell by 40,000 between June and July, with the job losses concentrated in fulltime private-sector positions. Total employment in July was scarcely higher than it was in January (measured on a seasonally adjusted basis). Manufacturing and construction are among the industries that have posted sizable job declines so far in 2025.
The picture is less gloomy on a year-over-year basis. Employment in Canada rose by 1.5 per cent from July 2024 to July 2025. But the month-to-month pace of job creation has been decelerating. Meanwhile, the unemployment rate has been ticking higher. In July, Canada-wide unemployment stood at 6.9 per cent, up from 5.7 per cent 18 months ago. Job vacancy rates have also been falling. Young adults are bearing much of the burden of Canada’s slumping labour market. Oddly, even amid a recession-bound economy, the federal government inexplicably continues to admit large numbers of temporary foreign workers.
Digging deeper into the data—and going back further to the pre-COVID years—yields insight into the dynamics of Canadian job creation. Looking at the period from January 2019 to July 2025 (roughly six-and-a-half years), we can track the trends in three broad employment categories: private-sector payroll jobs, public-sector jobs and the self-employed.
Since the start of 2019, public-sector jobs are up by almost one-quarter, while private-sector payroll positions have increased by 10 per cent. Meanwhile, the number of self-employed Canadians declined over the same period, suggesting a deterioration of the climate for entrepreneurship in the country. That’s troubling.
Entrepreneurs and startup businesses are the lifeblood of a dynamic market economy. Indeed, economists recognize that a key marker of a thriving economy is a healthy rate of business formation. New businesses are an important source of innovation and fresh ideas. They also help to inject competitive vigour into both local markets and the wider economy—something that’s clearly necessary in Canada, given years of subdued business growth and the cartelization of large swathes of our economy. Accelerating business formation should be a top priority for governments at all levels. Supporting the commercial success of existing young firms is also crucial, given the outsized contributions they make to the overall economic growth process.
For entrepreneurs and others who invest in startup companies, the risk of failure is ever present. Many new businesses don’t survive. In the goods-producing sector of the Canadian economy, about 70 per cent of new businesses survive for at least five years; in the broad services-producing sector, the rate is lower (56 per cent). Ten-year survival rates are around 50 per cent in goods-producing industries and just 35 per cent in service-based industries. Becoming a businessowner/operator is not for the faint of heart.
Canada urgently needs more high-growth businesses. This means building a robust pipeline of new entrepreneurial ventures.
Unfortunately, we have been falling short in this area, with the rate of business startups diminishing. It’s striking that Canada has around 100,000 fewer entrepreneurs than two decades ago, even though the population has increased dramatically over that time.
Canadian policymakers would be wise to ask themselves why entrepreneurship is faltering. Governments should act to modify their tax, regulatory and industrial policies to establish an economic environment that’s more conducive to entrepreneurial wealth-creation and the growth of small and medium-sized businesses.
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