Toronto, long considered the economic engine of Canada, is facing a sharp downturn in its labour market, raising concerns about broader national impacts. The city, which accounts for about 20 per cent of Canada’s GDP and a significant share of federal tax revenue, has seen its unemployment rate climb to nearly 9 per cent as of September. Outside of the pandemic years, this is the highest rate recorded since 2012. According to a new analysis from TD Economics, Toronto now holds the fourth-highest unemployment rate among major Canadian cities, surpassing most urban centres across the country.
Part of the rise in unemployment can be tied to rapid population growth. Since late 2023, Toronto’s labour force has expanded by 4.5 per cent—far outpacing available job openings. However, economists Rishi Sondhi and Tarek Attia note that the issue has become more complex in 2025. Hiring momentum has slowed considerably, weighed down by a weak housing construction sector, declining consumer spending, and disruptions caused by the ongoing Canada–U.S. trade war. Key industries linked to cross-border trade have suffered, with jobs in transportation and warehousing declining by roughly 6 per cent, and manufacturing employment down 2 per cent in the region.
The impact is particularly severe among young workers. Roughly one in five Torontonians aged 15 to 24 are unemployed, suggesting a deeper structural shift in the job market. The slowdown in hiring has been compounded by the high cost of living. Toronto’s housing market remains among the most expensive in the country, and the recent wave of mortgage renewals at significantly higher interest rates has forced many households to cut back on retail spending. This retrenchment has weakened job growth in restaurants, entertainment, recreation and other discretionary services that normally thrive on consumer activity. Meanwhile, another pillar of Toronto’s economy—its condo development and construction industry—is under heavy strain. Cancelled projects are at record highs, and pre-construction sales have plunged to levels not seen since the 2008 financial crisis. Developers are facing high financing costs and slower demand, resulting in layoffs across the construction sector. TD Economics expects construction employment to remain weak throughout next year, prolonging the city’s labour market challenges.
National employment data for October is expected soon, offering a clearer picture of whether Toronto’s labour market could stabilize. TD forecasts that unemployment may ease slightly in 2026 as population growth slows, yet pressures from trade tensions and a subdued housing sector are likely to keep Toronto’s jobless rate above the national average. For a city that has long powered Canada’s economic growth, the months ahead may signal a difficult recalibration—not just for Toronto, but for the country as a whole.
