In January, Canada experienced a mixed employment landscape, with a loss of 25,000 jobs but a drop in the unemployment rate to 6.5 percent, as per Statistics Canada. The decline in the jobless rate, the lowest since September 2024, was attributed to a decrease in the number of individuals actively seeking work. The labor force participation rate also decreased to 65 percent, with a rise in the number of individuals not employed or looking for work compared to the previous year.
The majority of job losses were driven by the manufacturing sector, which has been impacted by U.S. tariffs over the past 10 months. Sectors like educational services and public administration also experienced a decrease in employment. Douglas Porter, BMO’s chief economist, highlighted the dual impact of the employment drop and the decline in the unemployment rate, noting the complex nature of the current economic situation.
Porter explained that the economic adjustments are influenced by factors such as U.S. tariffs affecting manufacturing, a slowdown in population growth, and an increase in the elderly population. Despite these challenges, he suggested that the Bank of Canada should lean towards easing policy due to the underlying cooling in jobs and hours worked.
Although there was a decline in part-time employment, which fell by 1.8 percent, there was a slight increase in full-time work to partially offset the losses. Private-sector employees decreased by 52,000, balancing out the gains made in the previous three months, while the public sector saw minimal changes.
Certain sectors experienced job gains, including information, culture, and recreation; business, building, and support services; agriculture; and utilities. Ontario faced a decline of 67,000 jobs, primarily in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job gains.
Average hourly wages increased by 3.3 percent compared to the same period last year, reaching $37.17 per hour. Andrew Grantham, senior economist at CIBC Capital Markets, described the employment report as a mixed bag, anticipating minimal impact on Bank of Canada decisions and maintaining the view that interest rates will remain stable throughout the year.