Planned federal job cuts raises fresh questions over demand, defaults and regional risk
The federal government’s plan to eliminate 16,000 public service positions over three years lands squarely in the middle of Canada’s housing story, especially in Ottawa–Gatineau, where close to half of federal workers live and work.
Thousands of workforce adjustment notices have already gone out across major departments, with unions warning that many roles would either disappear or change substantially.
A concentrated jobs shock in key housing markets
Prime Minister Mark Carney’s first budget pledged to shrink the bureaucracy to 333,000 full‑time equivalent positions by 2029, 40,000 below its 2024 peak, as part of a sweeping spending review.
Health Canada alone confirmed 1,056 job cuts, while Immigration, Refugees and Citizenship Canada, Transport Canada, the Canada Revenue Agency and Shared Services Canada all saw hundreds of employees told their jobs could be at risk.
Housing professionals said the shake‑up could hit household confidence long before pink slips actually arrived.
“Mortgage defaults continue to be highly correlated with unemployment and, to a lesser extent, house price decreases,” DBRS said in earlier analysis of the Canadian market.
“As unemployment increases, more households could face a cash flow shortage that could lead to an increased number of mortgages in arrears,” the agency said.
Demand, arrears and policy response
Rising joblessness found that the effects could ripple through the country’s housing and mortgage markets for years. Research from TD Economics showed that entering the workforce in a weak labour market left lasting scars on earnings and wealth.
At the same time, rate policy could partly cushion the blow. Analysts noted that rising unemployment and slow GDP growth may call for a rate cut to stimulate the economy, even as inflation pressures sometimes forced the Bank of Canada to pause.
Longer amortizations have already become a key pressure valve: CMHC data showed the share of new uninsured mortgages with terms beyond 25 years stayed above 60% in mid‑2025 as borrowers tried to keep payments affordable. If federal layoffs pushed more households toward stretched timelines and refinancing, arrears risk would climb.
A market already wrestling with slower growth
Lower immigration would be “a bit of a dampener on consumer spending and, of course, the housing markets and rental markets for a little while,” BMO economist Sal Guatieri said. More recent forecasts point to a population downswing as a fresh source of demand risk for housing.
For mortgage professionals, the convergence of mass public‑sector layoffs, softer population growth and still‑elevated rates underscore that if headline prices held up, risk now sits squarely on borrowers’ incomes – and on how quickly displaced federal workers find their next paycheque.
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