In a note published ahead of the data release, CIBC economist Andrew Grantham wrote that Canada’s employment landscape remains weak. (Photo by Arrush Chopra/NurPhoto via Getty Images) · NurPhoto via Getty Images
Canada’s labour market lost a net 24,800 jobs in January, but the unemployment rate dropped to 6.5 per cent as fewer people looked for work, according to Statistics Canada data released on Friday. Economists had expected the Canadian economy to add 7,000 jobs and the unemployment rate to remain at 6.8 per cent, according to consensus estimates published by the Bank of Montreal.
“Overall, today’s employment report was very much a mixed bag, with both employment and unemployment apparently declining in the same month,” CIBC economist Andrew Grantham said in a note to clients after the release. “As a result, we doubt this will have much impact at the Bank of Canada, and it doesn’t change our view that interest rates will be on hold for the remainder of this year.”
TD economist Andrew Hencic pointed to “healthier” details in the report, in particular that the net loss was in part-time jobs (-70,000) but full-time positions rose 49,000. In the past year, Canada has added a net 149,000 full-time jobs, Hencic said, and dropped 14,000 part-time positions.
But Hencic also saw little to sway the Bank of Canada (BoC) from the current policy rate.
“The unemployment rate suggests the labour market is better than expected — but not necessarily tight,” Hencic wrote. “An unemployment rate of 6.5 per cent 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.”
By age and gender, the losses were concentrated among “core-aged” women (those aged 25 to 54), with 27,000 jobs lost. Other age categories were essentially unchanged, Statistics Canada said. Fewer job seekers in most demographic categories, however, meant unemployment rates fell broadly. Unemployment among core-aged women dropped 0.2 percentage points to 5.7 per cent, with 23,000 fewer in that group seeking work than in December. The unemployment rate for core-aged men fell 0.6 percentage points to 5.4 per cent, the lowest since July 2024 — but that was also due to a decline in those looking for jobs, with 49,000 fewer than in December.
However we got here, the reality is that the jobless rate is now tied for the lowest over the past 18 months, and has somehow dropped since the start of the trade war a year ago.Douglas Porter, BMO chief economist
In a recent note, RBC economist Nathan Janzen wrote that demographics and current immigration policy could allow the unemployment rate to fall even with “modest” job losses.
Story Continues
“Canada’s breakeven employment growth rate” — the number of new jobs needed to keep the unemployment rate stable — “is on track to be slightly negative,” he wrote, suggesting an average loss of 10,000 jobs per month would still maintain a constant unemployment rate.
The workforce shrank by 119,000 people overall, one of the highest drops outside the pandemic, noted BMO chief economist Douglas Porter, a change “driven by slowing population and a steep drop in the participation rate” — the proportion of the working-age population actually working or seeking employment.
The participation rate’s 0.4 percentage point drop, to 65 per cent, “was not driven by a wave of people retiring at the start of the year as the rate for those 55 and over actually nudged up in January,” Porter wrote. “However we got here, the reality is that the jobless rate is now tied for the lowest over the past 18 months, and has somehow dropped since the start of the trade war a year ago.”
Brendon Bernard, senior economist at Indeed Canada, suggested that looking at movements within the working-age population (ages 15 to 64) could offer a clearer picture in the “mixed” report. The job market for that group has been largely stagnant.
“Overall the share of working-age Canadians with a job was flat at 74.5 per cent for a third consecutive month, up somewhat from Q3, but matching where it stood a year earlier,” he said. “Without an economic spark on the horizon to kickstart hiring, and sectors like manufacturing taking another hit in January, we’re treading water for the time being.”
Jobs were lost in manufacturing (-28,000 positions, down 1.5 per cent), educational services (-24,000, down 1.5 per cent) and public administration (-10,000, down 0.8 per cent). There were gains in information, culture and recreation (+17,000 up 2.0 per cent), business, building and other support services (+14,000, up 2.1 per cent) and agriculture (+11,000, up 4.5 per cent).
Other financial industry experts said a drop in unemployment driven more by demographic changes than job creation meant the financial situations of many Canadians remained difficult. “Because it’s being driven more by slower population growth than stronger hiring, many households aren’t seeing real relief,” said Stacy Yanchuk Oleksy, CEO of credit counselling agency Money Mentors. “With rising costs and uneven wage growth, we’ve seen more families leaning on credit and accumulating debt to cover everyday expenses.”
In December, 8,200 jobs were added, essentially flat and down substantially from the 54,000 added in November. The December unemployment rate was 6.8 per cent, up from 6.5 per cent the previous month, as the number of people actively seeking jobs increased.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.
Download the Yahoo Finance app, available for Apple and Android.