In January, the Canadian job market showed a mixed performance as the economy shed 25,000 jobs while the unemployment rate dipped to 6.5 percent, marking its lowest level since September 2024, according to Statistics Canada. The decline in the jobless rate was attributed to a decrease in the number of individuals actively seeking employment. However, the labor force participation rate fell to 65 percent, and there was a year-over-year increase in the count of individuals not in employment or actively looking for work.
The manufacturing sector bore the brunt of the job losses, continuing its struggle amid ongoing challenges such as U.S. tariffs. Educational services and public administration also experienced a decrease in employment during the period. Chief Economist Douglas Porter from BMO highlighted the complexity of the situation, noting both negative aspects like the drop in employment, particularly in manufacturing, and positive developments such as the decrease in the unemployment rate and an uptick in hours worked.
Porter pointed out that the Canadian economy is currently adapting to significant changes, including the impact of U.S. tariffs on the manufacturing industry, a slowdown in population growth, and a growing elderly population. Despite indications of a cooling job market, Porter suggested that the Bank of Canada might not alter its interest rate policy due to Governor Tiff Macklem’s stance on the issue.
January saw a decline in part-time employment by 1.8 percent, partially offset by a marginal increase in full-time positions. The private sector saw a reduction of 52,000 employees, offsetting gains seen in the previous quarter of 2025. On the other hand, the public sector employment situation remained relatively stable.
In terms of sectoral changes, job gains were noted in information, culture, recreation, business, building, support services, agriculture, and utilities. Ontario witnessed a loss of 67,000 jobs, primarily in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador recorded job gains.
Average hourly wages rose by 3.3 percent, equivalent to $1.18, reaching $37.17 per hour compared to the same period last year. CIBC Capital Markets’ Senior Economist Andrew Grantham described the employment report as a mixed bag, with both employment and unemployment showing a decline in the same month. Grantham predicted that the report would likely have minimal impact on the Bank of Canada’s interest rate decisions, maintaining the view that interest rates would remain unchanged for the rest of the year.