In January, the Canadian job market showed mixed results as the economy shed 25,000 jobs, but the unemployment rate dropped to 6.5%, according to Statistics Canada. The decline in the jobless rate, the lowest since September 2024, was attributed to fewer individuals actively seeking employment. The labor force participation rate also decreased to 65%, while there was an increase in the number of individuals not employed or looking for work compared to the previous year.
The manufacturing sector experienced the most significant job losses, further impacting an industry already affected by U.S. tariffs. Employment in educational services and public administration also saw a downturn. Economist Douglas Porter from BMO noted that the situation could be viewed as both negative and positive due to the decrease in employment, particularly in manufacturing, but also the drop in the unemployment rate and an increase in hours worked.
Porter highlighted that the economy is adjusting to several significant changes simultaneously, including U.S. tariffs affecting manufacturing, a slowdown in population growth, and an aging population. Despite the economic challenges, Bank of Canada Governor Tiff Macklem has indicated a reluctance to adjust the key interest rate based on the current data.
The job losses in January were primarily driven by a reduction in part-time positions, offset slightly by an increase in full-time jobs. Private-sector employment declined by 52,000, countering gains seen in the previous quarter of 2025. Meanwhile, public sector employment remained relatively stable.
Certain sectors saw job growth, such as information, culture, recreation, support services, agriculture, and utilities. Employment decreased by 67,000 in Ontario, with manufacturing losses concentrated in the province, while Alberta, Saskatchewan, and Newfoundland and Labrador experienced job gains.
Average hourly wages rose by 3.3% compared to the previous year, reaching $37.17 per hour. Economist Andrew Grantham from CIBC Capital Markets described the employment report as mixed, with both employment and unemployment showing declines in the same month. He believes this data is unlikely to impact Bank of Canada decisions, reinforcing the expectation of stable interest rates throughout the year.
