The Canadian job market showed a mix of results in January, as the economy shed 25,000 jobs while the unemployment rate dropped to 6.5 percent, reported Statistics Canada on Friday. The decrease in the jobless rate, the lowest since September 2024, was attributed to a decline in active job seekers. The labor force participation rate also decreased to 65 percent, with an increase in the number of individuals neither employed nor seeking work compared to the previous year.
Major job losses were driven by the manufacturing sector, which has been under pressure from U.S. tariffs over the past 10 months. Additionally, educational services and public administration experienced a decline in employment. Chief Economist Douglas Porter from BMO noted that the employment report reflects the economy adjusting to significant changes, including U.S. tariffs affecting manufacturing, a slowdown in population growth, and an increase in the older demographic.
Although the decline in employment, particularly in part-time positions, may seem negative, there was a notable decrease in the unemployment rate and an uptick in hours worked. Porter highlighted that the underlying trend suggests a potential easing of monetary policy by the Bank of Canada, although Governor Tiff Macklem has indicated a reluctance to adjust the key interest rate based on the current mixed and weather-impacted data.
The month saw a drop in private-sector employment by 52,000 jobs, partially offsetting gains from the previous quarter. Public sector employment remained relatively stable. Job increases were observed in sectors such as information, culture, recreation, business services, agriculture, and utilities. Ontario reported the largest job losses, primarily in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job gains.
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 outcome, projecting no significant impact on the Bank of Canada’s interest rate decisions for the remainder of the year.
