In January, the Canadian job market showed a mix of results as the economy shed 25,000 jobs, but the unemployment rate decreased to 6.5 percent, as per 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 individuals not in employment or job hunting in January compared to the previous year.
The manufacturing sector led the job losses, further impacting an industry already affected by U.S. tariffs over the past 10 months. Additionally, employment in educational services and public administration experienced a decline. Douglas Porter, Chief Economist at BMO, noted that the employment report reflected both positive and negative aspects, with a notable decrease in jobs but also a drop in the unemployment rate and an increase in hours worked.
Porter highlighted that the economy was adapting to significant changes, including U.S. tariffs affecting manufacturing, a slowdown in population growth, and a rise in the older population demographic. Despite these challenges, he suggested that the Bank of Canada might consider easing policy due to the cooling job market and hours worked. However, Bank Governor Tiff Macklem emphasized that substantial factors would be required to alter the central bank’s current stance on interest rates.
The decline in jobs in January was primarily driven by a reduction in part-time employment, offset slightly by an uptick in full-time positions. Private-sector employment saw a decrease of 52,000, partially offsetting gains from the previous quarter. Public-sector employment remained relatively stable.
While job losses occurred in various sectors, there were job gains in information, culture, recreation, support services, agriculture, and utilities. Ontario experienced a decline of 67,000 jobs, mostly in manufacturing, whereas Alberta, Saskatchewan, and Newfoundland and Labrador saw job increases.
Average hourly wages rose by 3.3 percent, amounting to $37.17 per hour compared to the previous year. Despite the mixed employment report, Andrew Grantham, Senior Economist at CIBC Capital Markets, indicated that it was unlikely to significantly impact the Bank of Canada’s decisions on interest rates for the rest of the year.