Canada is facing a labour shortage, RBC says

RBC assistant chief economist Nathan Janzen said in a May 26 report that Canada’s labour force is facing a structural squeeze as immigration caps collide with elevated retirements.

Janzen said Canada’s population is on track to shrink in 2026 for the first time on record, while the available workforce is expected to decline by even more because a growing share of the population is reaching retirement age.

“The unemployment rate remains high following the Bank of Canada’s 2023-24 tightening cycle and disruptions from U.S. tariffs, giving policymakers room to maintain restrictive caps on immigration for now,” Janzen said. “But under the surface, longer-run structural headwinds against labour supply are building.”

He said retirements are running at about 25,500 workers per month, nearly double the roughly 14,000 monthly average from two decades ago. The pressure is expected to continue into the 2030s, with the youngest baby boomers turning 65 in 2029.

Janzen said Canada, like other advanced economies, depends on immigration to grow its workforce. Without immigration, the population of potential workers under 35 would decline by about 186,000 per year over the next five years, while the available under-35 workforce would fall by about 139,000 annually.

That may help younger workers in the near term by reducing competition for jobs, but Janzen said businesses will eventually face renewed labour shortages once today’s elevated unemployment is absorbed.

“Labour shortages are not, and won’t be, evenly distributed across the economy,” Janzen said, noting accommodation, food services and construction are among the sectors still reporting labour shortages as a growth constraint.

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