In January, the Canadian job market presented a mixed picture, as Statistics Canada reported a decrease of 25,000 jobs, yet the unemployment rate dropped to 6.5 percent. This decrease in the unemployment rate, the lowest since September 2024, was attributed to a reduced number of individuals actively seeking employment.

The labor force participation rate also declined to 65 percent, with an increase in the number of individuals not employed or looking for work compared to the previous year. The manufacturing sector bore the brunt of the job losses, impacted by ongoing U.S. tariffs. Additionally, employment in educational services and public administration saw declines.

Douglas Porter, BMO’s chief economist, noted the dual nature of the situation, stating that the report reflects both positive and negative aspects. The economy is adjusting to challenges such as U.S. tariffs affecting the manufacturing sector, a slowdown in population growth, and an aging population.

Despite the job losses, particularly in part-time positions, there was a slight uptick in full-time employment. Private-sector employment decreased by 52,000 jobs, offsetting previous gains. Public sector employment remained relatively stable.

Certain sectors experienced job gains, including information, culture, and recreation, as well as business and support services. However, Ontario faced a loss of 67,000 jobs, primarily in manufacturing, while Alberta, Saskatchewan, and Newfoundland and Labrador saw job gains.

Average hourly wages increased by 3.3 percent compared to the previous year. Andrew Grantham, senior economist at CIBC Capital Markets, characterized the employment report as a mixed bag, indicating that it is unlikely to significantly impact the Bank of Canada’s monetary policy, with interest rates expected to remain unchanged for the rest of the year.