Canada’s economy lost 25k jobs in January (-0.1% month/month), weaker than consensus expectations for a 5k increase. The details were healthier, with full-time positions rising 45k, while part time tumbled 70k. Since January 2025, full time positions are up 149k, while part-time roles have fallen by 14k.
The unemployment rate tumbled back to 6.5% from 6.8% in December. The unemployment rate was dragged lower by 119k people leaving the labour force. This brought down the labour force participation rate by 0.4 percentage points to 65.0% – its lowest level since May 2021. Importantly, StatCan noted that reasons for not participating in the labour market were little changed from last year, with the exception of youth aged 15 to 24 being more likely to be attending school.
Job gains were concentrated in information, culture and recreation (+17k), business, building and other support services (+14k) agriculture (+11k) and utilities (+4.2k). The biggest losses were in manufacturing (-28k), educational services (-24k) and public administration (-10k).
Wage growth slowed again in January, with average hourly wages up 3.3% versus a year ago (3.4% in December).
Key Implications
Was this good news or bad news? The unemployment rate unexpectedly fell back to 6.5% – its lowest level since September 2024. However, the economy still shed 25K jobs. It was thanks to an even larger decline in the labour force that the overall job market got tighter. This is a trend to keep an eye on. Canada’s population is expected to shrink in 2026, meaning a smaller pool of available workers. Under these conditions the unemployment rate can continue to fall even if Canada is losing jobs.
One report is unlikely to move the needle for the Bank of Canada. The unemployment rate suggests the labour market is better than expected – but not necessarily tight. An unemployment rate of 6.5% is still above a long-term level associated with stable inflation. Coupled with the uncertainty about the supply side of the economy, and the prospects for trade, the BoC is likely content to watch things play out.
, weaker than consensus expectations for a 5k increase. The details were healthier, with full-time positions rising 45k, while part time tumbled 70k. Since January 2025, full time positions are up 149k, while part-time roles have fallen by 14k.){kind=link}