In January, the Canadian job market displayed a mixed performance, shedding 25,000 jobs while the unemployment rate dipped to 6.5%, as per Statistics Canada. The decrease in the jobless rate, the lowest since September 2024, was attributed to a reduction in active job seekers. The labor force participation rate also fell to 65%, although there was an uptick in the number of individuals not in employment or seeking work compared to the previous year.
The decline in employment was predominantly driven by the manufacturing sector, which has been under pressure from U.S. tariffs over recent months. Educational services and public administration also experienced a drop in employment figures. Economist Douglas Porter of BMO characterized the situation as a mix of positive and negative outcomes, with a focus on the challenges faced by the manufacturing industry.
Porter highlighted three significant ongoing changes impacting the economy: U.S. tariffs affecting manufacturing, a slowdown in population growth, and an increase in the elderly population. He noted that these factors could lead to a decrease in the natural unemployment rate, signaling a cooling in job opportunities and working hours, potentially nudging the Bank of Canada towards a policy easing stance.
Despite the job losses recorded in January, predominantly in part-time roles, there was a marginal increase in full-time positions. The private sector saw a decline of 52,000 employees, somewhat offsetting gains from the previous quarter. Public sector employment remained relatively stable.
Certain sectors such as information, culture, recreation, business support services, agriculture, and utilities saw job gains. Ontario witnessed a loss of 67,000 jobs, mostly in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador experienced job growth. Average hourly wages rose by 3.3% compared to the previous year.
Andrew Grantham, senior economist at CIBC Capital Markets, viewed the employment report as a blend of positive and negative trends, expecting minimal impact on the Bank of Canada’s interest rate decisions for the year. He maintained the stance that interest rates would likely remain unchanged throughout the year.