In January, Canada experienced a mixed employment situation, as the economy shed 25,000 jobs while the unemployment rate dropped to 6.5 percent, according to Statistics Canada. The decline in the jobless rate, the lowest since September 2024, was attributed to a decrease in active job seekers. The labor force participation rate also decreased to 65 percent, with an increase in the number of individuals not employed or seeking work compared to the previous year.
The manufacturing sector bore the brunt of job losses, influenced by ongoing challenges from U.S. tariffs. Sectors like educational services and public administration also witnessed a decline in employment numbers. Douglas Porter, BMO’s chief economist, noted the dual impact of the employment drop and the decrease in the unemployment rate, signaling both positive and negative implications.
Porter highlighted the Canadian economy’s adjustment to key changes, such as U.S. tariffs affecting manufacturing, a slowdown in population growth, and an aging population. He suggested that while job and hours worked indicators are cooling, the Bank of Canada might lean towards easing policy due to underlying economic shifts.
Despite the job losses primarily in part-time roles, there was a slight increase in full-time employment. Private-sector employment saw a decrease of 52,000 jobs, partially offsetting prior gains. Meanwhile, the public sector employment figures remained relatively stable.
In terms of job gains, sectors like information, culture, recreation, business services, agriculture, and utilities saw increases. Ontario experienced a significant decline in employment, particularly in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job growth.
Average hourly wages rose by 3.3 percent year-over-year, amounting to $37.17 per hour. Andrew Grantham, senior economist at CIBC Capital Markets, described the employment report as mixed, projecting minimal impact on Bank of Canada policies and suggesting a status quo on interest rates for the year.
Overall, the latest employment figures in Canada present a complex scenario of job losses in various sectors, contrasting with a decrease in the unemployment rate, reflecting the dynamic nature of the country’s economic landscape.