Slower Immigration Could Boost Canadian Wages, Conference Board Says

The Conference Board of Canada expects wage growth to accelerate in the coming years as population growth slows and labour supply tightens. In its updated economic forecast released Monday, July 7, the national think tank said Canada’s labour market has remained surprisingly resilient this year despite tariff pressures from the United States.

Canada’s national unemployment rate edged up to 7.0% in May, yet overall employment remains slightly higher than at the end of last year. Cory Renner, the Conference Board’s associate director of economic forecasting, told reporters the board had initially anticipated a broader job impact from trade tensions, but the effects so far have been concentrated in trade-exposed industries such as manufacturing and transportation.

“The labour market’s actually holding up better than we expected,” Renner said, noting that many employers and workers remain cautious about making large changes to hiring and careers while trade uncertainty persists.

Labour force growth expected to slow

The report forecasts subdued hiring through the remainder of 2025 as firms delay payroll expansion in the face of trade war uncertainty. The Conference Board noted that, in the first quarter of 2025, labour force growth lagged behind total employment growth for the first time in over two years—an early sign that population-driven labour supply may be easing.

Renner said the federal government’s recent moves to slow immigration could shift bargaining power gradually back toward workers, pushing tighter competition for available talent. As employers increasingly need to recruit from Canada’s existing labour pool, the Conference Board expects the unemployment rate to fall to 6.2% in 2026 and to 5.8% in 2027.

That tightening should support wage gains above the rate of inflation, the board says. “There is a movement toward workers having a little more power, and that should accelerate wage growth a bit in the second half of the year and into next year,” Renner added.

Economy growing modestly amid trade uncertainty

Statistics Canada reported average hourly wages rose 3.4% year over year in May, the same pace as April. Meanwhile, the Conference Board projects real GDP growth of about 1.5% for the year as ongoing U.S. trade measures weigh on business and consumer confidence.

The outlook assumes current U.S. tariff levels remain in place through the end of 2026. The Conference Board models a gradual easing of restrictions afterward as a new North American trade arrangement is negotiated and U.S. midterm elections conclude. While Canadian exporters have redirected some shipments to alternative markets, those gains have not fully offset weaker exports to the United States.

The board is not forecasting a full-blown recession in Canada, but Renner cautioned the economy is likely to register a contraction in the second quarter of 2025 as tariffs take effect. He added that growth should recover modestly thereafter as muted momentum returns.

Housing market slow, seeing reduced demand

Housing activity has been subdued this year as concerns over possible job losses and economic uncertainty keep potential buyers on the sidelines. Renner expects a modest rebound in home sales beginning next year, though slower immigration will likely moderate demand growth in the housing market.

The Bank of Canada has left its policy rate unchanged at 2.75% through its two most recent decisions while waiting for clearer signals on how tariffs are influencing inflation and broader economic activity. The central bank typically lowers the policy rate to stimulate spending and boosts it when inflation risks rise. Annual inflation in Canada held steady at 1.7% in May, according to Statistics Canada.

Rate cut hopes dim as inflation holds

Economists have noted marginal improvements in some of the Bank of Canada’s preferred core inflation measures, but not enough to convince markets a cut is imminent at the central bank’s next meeting on July 30. The Conference Board still expects one quarter-point rate cut in the second half of the year, but Renner said inflation’s resilience and the lack of a decisive economic slowdown have reduced the likelihood of more aggressive easing.

“If tariffs rise and the economy weakens further, then the Bank of Canada may be more inclined to cut rates,” he said. “For now, risks seem to be tilting toward higher inflation and an economy that is just holding on. The bank is probably more worried about inflation at the moment.”

Statistics Canada will release fresh economic data covering June, with jobs figures due on Friday and inflation numbers scheduled for next week—data the Conference Board and financial markets will watch closely for signs of direction in both prices and labour market conditions.

Read more about jobs:

• Is Canada in a recession?
• Ottawa to expand the Canada Summer Jobs program for youth
• What to do if your employer is in financial trouble
• How to negotiate a job offer to get better benefits