Posthaste: Canada's biggest city is losing momentum, and that's a problem for the whole country
Employment is falling and the standard of living is stagnating in Canada’s biggest city and that’s a problem for the whole country, say recent studies.
Toronto is lagging other big centres in the country as the trade war and slumping housing market take a toll on the economy.
“Far from being an economic powerhouse, the evidence presented here points to rising unemployment, weak income growth, and stagnant living standards in Canada’s largest metropolitan area,” said a Fraser Institute report by Ben Eisen and Nathaniel Li.
The Fraser study looks at Toronto’s economic performance since 2000, specifically how its unemployment rate , median employment income, and before-tax household incomes compare to other metropolitan areas across Canada.
Employment income growth delivered an especially “dismal” performance. From 2000 to 2023, median income growth in Toronto fell by 0.2 per cent, while the average for Canadian cities grew by 15.1 per cent.
Only Windsor and Oshawa experienced bigger declines.
Median pre-tax household income, an important indicator of well-being according to the Fraser Institute, has stagnated since the turn of the century, causing Toronto to fall in the Canadian league table to 30th out of 42 metro areas.
Unemployment here has also climbed faster than in other cities. According to the Fraser study, Toronto’s unemployment rate was eight per cent in 2024, 2.1 percentage points higher than the average for all Canada’s Census Metropolitan Areas (CMAs), and 1.7 percentage points higher than the average for Ontario’s CMAs.
That rate continued to climb in 2025 to 8.9 per cent, the highest since 2012, outside of the pandemic, according to a separate report by Toronto Dominion Bank.
Up until 2025, rising unemployment in the city was mostly due to the swelling of the labour force during Canada’s post-pandemic population boom. But the start of Donald Trump’s trade war brought a sharp slowdown in hiring momentum. Sectors most exposed to U.S. trade such as manufacturing, transportation and warehousing and wholesale trade experienced steeper declines in jobs than in the rest of the province, said TD researchers.
Job growth in discretionary services has also been slower as Toronto’s heavily indebted homeowners cut spending as mortgage rates rose.
Construction hiring is down as builders, especially in the condo market, pulled back on projects amid the housing slump.
Toronto has long been a key economic hub in Canada, employing about a fifth of the nation’s workforce and contributing about 20 per cent of Canada’s gross domestic product and about a half of Ontario’s.
Ontario also supplies about 40 per cent of federal government revenues, with Toronto contributing a substantial share of that, said TD.
As big cities are normally drivers of national productivity and income growth, Toronto’s lagging performance could become a potential headwind for the overall economy, say researchers.
“Toronto represents about 20 per cent of the entire national economy, and its stagnation is an important contributor to Canada’s dismal recent economic growth story,” said Eisen, senior fellow at the Fraser Institute.
“Given the outsized role Toronto plays in Canada’s overall economy, the city’s underperformance is a concern for all Canadians.”
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“Forget about coming for your job, Wall Street has decided that AI may be coming for your entire industry,” observed BMO Capital Markets chief economist Douglas Porter.
The release of new artificial intelligence tools in recent days has led to shocking routs in sectors ranging from logistics, software, private credit, insurance and wealth management to even real estate as investors dump anything they think will be disrupted by the new technology.
“The definition of AI losers is changing almost daily to the point where you can’t track it via themes or baskets,” David Wagner, portfolio manager at Aptus Capital Advisors, told Bloomberg.
Anthropic PBC must be the most famous example of the “AI scare trade” so far after its new AI automation tool sparked a US$285-billion rout across the software, financial services and asset management sectors.
Then last week a tiny former karaoke company with a market value of just $6 million issued a press release on a new logistics platform that sent that sector into its worst selloff since Trump’s Liberation Day meltdown.
“The level of paranoia is Category 5,” Joseph Shaposhnik, portfolio manager at Rainwater Equity told Bloomberg. “It’s not something that we’ve seen in quite a long period of time.”
However, as Porter points out, in the quieter corners of the market others are doing just fine, as highlighted by the Dow breaching 50,000 for the first time earlier this month.
As today’s chart shows consumer staples are in the ascendant with “the slowest-growing, most ‘boring’ sectors” such as utilities and industrials leading the way.
“In short, we are witnessing a classic rotation from the sizzling to the silent,” said Porter.
- Today’s Data: Canadian inflation for January, international securities transactions, United States NAHB housing market index
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- Canada in ‘period of reckoning,’ energy minister tells Calgary audience
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- ‘We need to wake up’: Atlantic Canada a microcosm of the problems facing the rest of the country
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Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.
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Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.
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