In January, the Canadian job market showed a mix of positive and negative trends, as the economy shed 25,000 jobs while the unemployment rate decreased to 6.5 percent, 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 dipped to 65 percent, with a rise in the number of individuals not employed or looking for work compared to the previous year. Manufacturing bore the brunt of the job losses, impacted by ongoing U.S. tariffs. Sectors such as educational services and public administration also experienced declines in employment.
Douglas Porter, BMO’s chief economist, noted the dual nature of the employment report, highlighting the negative impact of reduced employment in manufacturing alongside the positive aspects of a lower unemployment rate and increased hours worked. He emphasized the broader economic adjustments in response to challenges such as U.S. tariffs, a slowdown in population growth, and an aging population.
While the January job losses were primarily driven by a decrease in part-time positions, there was a slight uptick in full-time employment. Private-sector employment saw a decline of 52,000 jobs, partially offsetting gains from the previous quarter, while public sector employment remained relatively stable.
Certain sectors saw job gains, including information, culture, and recreation; business support services; agriculture; and utilities. Ontario experienced a loss of 67,000 jobs, particularly in the manufacturing sector, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job increases.
Average hourly wages rose by 3.3 percent compared to the previous year, reaching $37.17 per hour. Andrew Grantham, senior economist at CIBC Capital Markets, described the employment report as a mixed bag, indicating both employment and unemployment reductions in the same month. This nuanced landscape is unlikely to significantly impact the Bank of Canada’s interest rate decisions for the remainder of the year.