Ontario manufacturing share hits lowest level since 1976 as 20,600 jobs lost
Ontario's manufacturing sector slipped to its weakest position on record this month, with employment in the industry falling below 10 per cent of total provincial jobs for the first time since comparable data began in 1976. The province has shed 20,600 manufacturing positions in a net reduction flagged by the Financial Accountability Office of Ontario, the legislature's independent budget watchdog.
The decline reflects more than a single bad quarter. Manufacturing output has retreated in seven of the past eight quarters between mid-2023 and mid-2025, and the sector's real production is now at its lowest level since 2015, once the pandemic dip is excluded.
Where the losses are concentrated
According to the FAO's latest figures, cited by Global News, the auto industry has absorbed the deepest cut with an 18.3 per cent contraction in output. Machinery manufacturing is down 14.8 per cent and primary metals have fallen 9.0 per cent. Plants in Windsor, Oakville, Brampton and Oshawa have announced rolling shutdowns or shift reductions since late 2025.
U.S. tariffs on Canadian vehicles, steel and aluminum, imposed in stages through 2025, remain the single largest drag on the sector. A parallel softening in North American vehicle demand has compounded the problem, as has a slower-than-expected transition to electric vehicles at several Ontario assembly plants.
Budget watchdog's warning
The FAO projects Ontario's unemployment rate will climb to 7.4 per cent in 2026, up from 6.8 per cent in 2025. The watchdog flagged a risk that the manufacturing decline could become structural if plant closures trigger the departure of skilled trades and engineering talent from southern Ontario.
"A manufacturing share below 10 per cent marks a turning point for a province whose economy was built on it," the FAO wrote in its spring outlook.
Economists at the Royal Bank of Canada and TD Economics echoed the watchdog's concern, warning that the GTA and southwestern Ontario labour markets are unusually exposed because manufacturing wages remain roughly 20 per cent above the service-sector average and anchor local tax bases.
Government response
In the 2026 provincial budget tabled earlier this month, Premier Doug Ford unveiled a 30 per cent cut to the small-business tax rate, dropping it from 3.2 per cent to 2.2 per cent, and a $4-billion Ontario Investment Fund aimed at manufacturers, critical-mineral processors and battery-supply-chain firms. Global News reported that the budget also extends accelerated capital-cost allowances for manufacturing equipment through 2030.
Labour groups welcomed the investment fund but argued that tax cuts alone will not offset tariff pressure. Unifor national president Lana Payne called for federal and provincial governments to coordinate a buy-Canadian procurement strategy for public transit, defence and health-care equipment to backfill lost export demand.
What's next
Ontario officials will lobby Ottawa through the spring first ministers' meeting for targeted tariff-relief measures and for a joint federal-provincial auto-retooling package. The FAO's next quarterly report is due in July and will be closely watched for evidence that the $4-billion investment fund is translating into new plant announcements. Readers can find more context in our business and law archive.
