The Canadian job market in January showed a mix of results, as the economy shed 25,000 jobs while the unemployment rate decreased to 6.5 percent, reported Statistics Canada on Friday. 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 decreased to 65 percent. However, there was a year-over-year increase in the number of individuals not employed or looking for work in January.
The majority of job losses were in the manufacturing sector, which has been impacted by U.S. tariffs over the past 10 months. Educational services and public administration also experienced declines in employment. Douglas Porter, BMO’s chief economist, commented on the mixed results, noting both positive and negative aspects in the report.
Porter highlighted three significant changes affecting the economy: U.S. tariffs affecting manufacturing, a slowdown in population growth, and an increase in the older population. Despite the cooling in job numbers and hours worked, Porter suggested that the Bank of Canada should maintain its current policy stance due to the complex economic landscape.
The decrease in part-time employment, down by 1.8 percent, drove the job losses in January, offset slightly by a slight increase in full-time positions. Private-sector employment saw a decline of 52,000, undoing some gains from the previous months. Public sector employment remained relatively stable.
In terms of job gains, industries such as information, culture, recreation, business services, agriculture, and utilities saw increases. Ontario experienced a loss of 67,000 jobs, particularly 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. Despite the mixed results in the employment report, Andrew Grantham, senior economist at CIBC Capital Markets, indicated that it is unlikely to have a significant impact on the Bank of Canada’s interest rate decisions for the rest of the year.