Prime Minister Mark Carney at the EU Summit, June 2025 <\/p>\n
Prime Minister Mark Carney\u2019s plan to slash $25 billion from annual federal spending has triggered widespread concern as the country grapples with rising unemployment and a weakening job market. Economists warn that the timing of deep public service cuts couldn\u2019t be worse.<\/p>\n
Canada\u2019s unemployment rate rose to 7.0% in May, the highest outside pandemic years since 2016. That translates to roughly 1.6 million unemployed Canadians \u2014 a 14% increase year-over-year. And while the economy added 8,800 jobs in May, nearly all the gains were in part-time work, offset by steep full-time losses.<\/p>\n
Against this backdrop, the federal government is directing departments to carve out savings of up to 15% by 2028\/29 \u2014 excluding only the Department of National Defence, RCMP, and Border Services Agency, which face a smaller 2% target. The scale of the review is nearly double what the Liberals campaigned on and is now widely expected to result in thousands of public-sector layoffs.<\/p>\n
Already, the federal workforce has shrunk by 9,807 jobs since early 2024, with the Canada Revenue Agency (CRA) accounting for more than two-thirds of those cuts.<\/p>\n
Canada\u2019s aggressive federal cost\u2011cutting plan could prompt sweeping job losses in the public sector just as unemployment hits a multi\u2011year high and trade\u2011sensitive industries reel.<\/p>\n
Key points:<\/p>\n
Canada\u2019s unemployment rate climbed to 7.0% in May 2025, the highest since September 2016, equating to about 1.6 million unemployed \u2014 a surge of nearly 14% from a year earlier.<\/p>\n
May\u2019s modest gain of just 8,800 jobs, with 58,000 full\u2011time hires offset by a 49,000 jump in part\u2011time layoffs, underscores a weak labour market<\/p>\n
Meanwhile, federal public\u2011service shrank by 9,807 positions through March 2025 \u2014 68% of the losses from the Canada Revenue Agency (CRA) alone.<\/p>\n
The fallout could impact services and compound already high national unemployment.<\/p>\n
Sharon DeSousa, president of the Public Service Alliance of Canada, says the rushed pace of the spending review threatens not only public service jobs but also the services Canadians rely on. \u201cAt the end of the day, we\u2019re not a business \u2014 we\u2019re a government that delivers services,\u201d she said.<\/p>\n
Story Continues <\/p>\n
Economist David Macdonald of the Canadian Centre for Policy Alternatives called the cuts \u201cthe deepest since the Chr\u00e9tien era,\u201d warning they could touch Indigenous services, non-profits, and foreign aid. \u201cThere\u2019s a lot more on the table now,\u201d he said.<\/p>\n