The Canadian job market showed a mixed performance in January, as the economy shed 25,000 jobs while the unemployment rate dropped to 6.5%, according to Statistics Canada. The decrease in the jobless rate, the lowest since September 2024, was attributed to a decline in active job seekers. Despite this, the labor force participation rate fell to 65%, and there was an increase in the number of individuals not employed or seeking work compared to the previous year.
Major job losses were predominantly observed in the manufacturing sector, which has been impacted by U.S. tariffs over the past 10 months. Additionally, employment in educational services and public administration experienced a decline. Douglas Porter, BMO’s chief economist, characterized the situation as a mix of negative and positive news, emphasizing the challenges faced by the manufacturing sector and the increase in working hours.
The economic adjustments were influenced by multiple factors, including U.S. tariffs affecting manufacturing, a slowdown in population growth, and a rise in the elderly population. Porter suggested that the underlying cooling in job numbers and hours worked might prompt the Bank of Canada to consider easing policy, despite Governor Tiff Macklem’s stance on maintaining the current interest rate.
The decrease in part-time employment, down by 1.8%, drove the job losses in January, partially offset by a slight uptick in full-time positions. The private sector saw a decline of 52,000 employees, partly offsetting the gains made in the previous quarter of 2025. On the other hand, the public sector employment remained relatively stable.
In terms of sector-specific performance, there were job gains in information, culture, recreation, business support services, agriculture, and utilities. Ontario experienced a loss of 67,000 jobs, particularly in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job gains of 20,000, 6,100, and 3,800 respectively.
Average hourly wages increased by 3.3% to $37.17 compared to the same period last year. Andrew Grantham, senior economist at CIBC Capital Markets, described the employment report as a mixed bag with both employment and unemployment showing declines in the same month. He noted that this is unlikely to impact the Bank of Canada’s interest rate decisions, maintaining the expectation of rate stability for the remainder of the year.
