Surprising Data: Canada Has Cut More Federal Jobs Than the U.S. This Year

Federal Job Cuts in Canada vs. the U.S.

A chainsaw-wielding Elon Musk caused quite the stir in Washington earlier this year when Donald Trump established the Department of Government Efficiency to reduce government spending and cut jobs. According to some estimates, hundreds of thousands were laid off or targeted for layoffs, though Musk has since left DOGE and some employees have been asked to return to work.

But here’s a “fun fact” that Taylor Schleich, an economist with National Bank of Canada, has unearthed from recent data that goes against popular belief: Canada has actually cut a bigger share of federal jobs than the United States this year.

The Numbers Behind the Cuts

According to Statistics Canada’s latest Survey of Employment, Payrolls and Hours, employment in Canada’s federal government fell 3.8 per cent through July, while the U.S. federal workforce dropped only 3.1 per cent through August, he said.

The decline in Canada’s federal workforce started before 2025 and the election of Prime Minister Mark Carney, Schleich points out. The 2024 budget under former Prime Minister Justin Trudeau aimed to save money through attrition, and since early that year the federal workforce has shrunk by about 5 per cent.

Mind you, some would argue there was greater scope for job cuts in Ottawa. Thanks to the surge in hiring through most of Trudeau’s tenure, Canada still employs a larger share of federal workers, he said. This wasn’t always the case. Before 2020 Canada had a smaller government footprint than the United States.

Future Outlook and Economic Implications

There’s also the possibility that America’s public service is about to get even smaller if Trump carries through on his threat to cut more U.S. agencies and jobs during the government shutdown now going on.

Schleich said whether the job-cutting trend continues in Ottawa is hard to say, as we won’t get a look at the federal spending plans until Nov. 4. But to get back to the size of the federal workforce in 2015 before Trudeau took power would require cutting 14 per cent of employees or about 50,000 jobs, he said.

“It’s hard to imagine this playing out as the government is planning to expand its reach in a big way (e.g. via the new Build Canada Homes or the Major Projects Office),” he said. “What is clear is that fewer federal workers won’t be sufficient to offset the cost of a growing list of spending commitments and forgone revenues via tax cuts.”

The parliamentary budget officer last week forecast that the federal government will post an annual deficit of $68.5 billion this year, up from $51.7 billion last year.

Canada’s Debt Market Activity

Canadian governments, provincial and federal, are currently tapping debt markets just as aggressively as the United States, whose rising obligations have alarmed investors around the world.

Five months into the fiscal year, the Government of Canada has auctioned $138 billion of new bonds, up 44 per cent from the year before, said National. Add in the provinces’ $81.5 billion, and the grand total comes to $220 billion in bond supply, a monthly pace equal to 1.4 per cent of gross domestic product.

The $2 trillion in gross Treasury bond supply from the U.S. in the same period, on the other hand, amounts to 1.3 per cent of GDP.

The Impact of AI on Electricity and Inflation

Another change the age of AI has thrust upon us is electricity is becoming a bigger driver of inflation.

“The voracious appetite for power from data centres has sent once-sleepy electricity demand skyward,” said Douglas Porter, chief economist of BMO Capital Markets, in a recent note.

This really shows up in the United States, where electricity prices have climbed an average of 6.5 per cent a year over the past five years. Electricity’s weight on the consumer price index is about 2.5 per cent, so the increase has added 0.15 percentage points to inflation, he said.

Canada hasn’t seen the same surge mainly because prices here are more regulated and demand less “frothy,” said Porter. Canadian costs are up just 1.4 per cent in the past year, and the average annual increase over the past five years is about half that of the United States’.