In January, the Canadian job market showed a mixed performance as the economy shed 25,000 jobs, yet the unemployment rate decreased to 6.5 percent, as reported by Statistics Canada. The drop in the jobless rate, the lowest since September 2024, was attributed to fewer individuals actively seeking employment. The labor force participation rate also declined to 65 percent, while there was an increase in the number of people not employed or looking for work compared to the previous year.
The majority of job losses were observed in the manufacturing sector, which has been adversely affected by U.S. tariffs over the past ten months. Additionally, employment in educational services and public administration experienced a decline. Douglas Porter, BMO’s chief economist, described the situation as a mix of negative and positive news, citing challenges in manufacturing but also noting a decrease in the unemployment rate and an increase in hours worked.
Porter highlighted three significant ongoing economic adjustments: the impact of U.S. tariffs on Canadian manufacturing, a sudden slowdown in population growth, and an aging population, especially in the 65 and older demographic. Despite these factors, Porter suggested that the Bank of Canada might lean towards easing policy due to the cooling job market, although Governor Tiff Macklem has indicated a reluctance to adjust the key interest rate based on the latest report’s mixed results and weather-related effects.
In January, the decline in employment was primarily driven by a reduction in part-time jobs, which decreased by 1.8 percent, partially offset by a slight increase in full-time positions. The private sector saw a decrease of 52,000 employees, partially offsetting gains from the previous quarter, while the public sector remained relatively stable.
Notable job gains were seen in sectors such as information, culture, recreation, business services, construction support services, agriculture, and utilities. Ontario experienced a loss of 67,000 jobs, primarily in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job gains of 20,000, 6,100, and 3,800, respectively.
Average hourly wages rose by 3.3 percent compared to the same period last year, reaching $37.17 per hour. Andrew Grantham, senior economist at CIBC Capital Markets, viewed the employment report as a mixed outcome with both employment and unemployment figures declining simultaneously. Grantham predicted minimal impact on the Bank of Canada’s decisions and maintained the view that interest rates would remain unchanged throughout the year.