Canada experienced a mixed situation in its job market for January, as the economy shed 25,000 jobs while the unemployment rate improved 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 decreased to 65 percent, although there was a rise in the number of individuals not employed or looking for work compared to the previous year.
The manufacturing sector bore the brunt of the job losses, continuing to struggle due to U.S. tariffs imposed over the past 10 months. Educational services and public administration also experienced a decline in employment. Douglas Porter, BMO’s chief economist, characterized the situation as a mix of negative and positive outcomes, with a drop in employment but a lower unemployment rate and increased hours worked.
Porter highlighted that the economy is adapting to multiple significant changes simultaneously, including the impact of U.S. tariffs, a slowdown in population growth, and an aging population over 65. Despite indicators pointing towards a cooling job market, Porter noted that the Bank of Canada is unlikely to adjust its key interest rate, as Governor Tiff Macklem has emphasized the need for substantial shifts to prompt any policy changes.
The job losses primarily stemmed from a decrease in part-time roles, which saw a 1.8 percent decline, partially offset by a slight uptick in full-time positions. The private sector witnessed a decrease of 52,000 employees, partially offsetting gains made in the final quarter of 2025. Public sector employment remained relatively stable.
Certain sectors, including information, culture, and recreation, recorded job gains, while Ontario saw a reduction of 67,000 jobs, particularly in manufacturing. Conversely, Alberta, Saskatchewan, and Newfoundland and Labrador experienced job growth. Average hourly wages increased by 3.3 percent compared to the previous year, reaching $37.17 per hour.
Andrew Grantham, senior economist at CIBC Capital Markets, characterized the employment report as a mixed bag, with both employment and unemployment figures declining in the same month. Grantham predicted that the report would have limited impact on the Bank of Canada’s decisions, maintaining the view that interest rates will remain unchanged throughout the year.