Canada’s job market looks fine on paper. In reality, it’s getting ugly.

Headline data is masking a brutal split between a booming West and collapsing private-sector hiring in Ontario and Quebec.

Canada’s labour market is becoming increasingly divided, and the fault line runs straight through Central Canada.

The February payroll survey showed a staggering 60,000 monthly decline in employment. If unrevised, that would mark the steepest one-month job loss since 2021.

The weakness was broad-based, with 15 of 20 industry groups posting declines. This wasn’t an isolated pullback in one sector - it was widespread deterioration across the economy.

More concerning is what’s happening in the private sector. Private payroll employment is now down 0.5% year over year, the weakest non-recessionary reading on record. Outside of outright recessions, Canada has rarely seen private-sector hiring weaken this sharply.

The pain is being felt most acutely in Central Canada:

• Ontario lost 34,000 jobs in February

• Quebec lost 15,000 jobs

Both provinces are now registering negative annual job growth. This is something that historically occurs almost exclusively during recessions.

Meanwhile, the economic backdrop in the Prairies looks dramatically different. Resource-heavy provinces continue to benefit from stronger commodity prices and energy-sector activity:

Alberta payroll employment is still growing at 1.3% year over year. Saskatchewan is even higher (1.7%), and even the Atlantic provinces are seeing gains driven by oil-rich Newfoundland.

So while the national headline suggests a flat labour market, the underlying reality is far more polarized:

Central Canada is weakening rapidly while the oil-producing parts of the country continue to outperform.

Oil shock threatens to intensify these trends

That divergence could become even more pronounced in the months ahead.

The recent surge in oil prices is effectively acting as a tax on consumers in Ontario and Quebec, where households are already struggling under elevated mortgage payments, rising debt-servicing costs, and deteriorating employment conditions. Higher gasoline and transportation costs squeeze discretionary spending further and hit consumer confidence at exactly the wrong time.

And then there’s the interest rate risk.

Markets are increasingly pricing in the possibility that rising energy prices push inflation back above the Bank of Canada’s comfort zone. At time of writing, two rate hikes are priced in for 2026 and another two in early 2027.

This would hurt all Canadian consumers, but those in oil-producing provinces have an offsetting buffer from the boom in that sector. For them, higher oil prices are stimulative and can offset some of the interest rate pain. Central Canada is not so lucky.

That would create an extremely uneven economic outcome across the country.

Canada increasingly looks like a two-speed economy — one tied to struggling consumers and housing-sensitive sectors in Central Canada, and another benefiting from commodities, energy, and stronger fiscal tailwinds out west.

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This has been a guest post by Ben Rabidoux.

Ben is the founder of institutional research firm North Cove Advisors and real estate research firm Edge Analytics. You can read more of his content at www.edgeanalytics.ca