Canada unexpectedly lost 24,800 jobs in January but the unemployment rate dipped to a 16-month low of 6.5% as fewer people looked for work, Statistics Canada indicated on Friday.
Analysts had forecast a gain of 7,000 jobs and for the unemployment rate to remain unchanged at 6.8%.
Full-time employment in January rose by 44,900 jobs while part time employment fell by 69,700 positions.
The unemployment rate – the lowest since the 6.5% recorded in September 2024 – fell across most major demographic groups, largely reflecting declines in the number of job searchers.
The Bank of Canada says the labor market is softening after the economy added a total of 181,000 new jobs from September through November. Canada created 10,100 jobs in December.
The manufacturing sector lost 27,500 positions in January, most of them in the industrial heartland of Ontario, where some key industries have been hit by U.S. tariffs.
“These trends will likely continue as … employees of U.S. trade-exposed industries begin to leave their jobs at higher rates than employees of other industries,” said Joshua Grundleger, a director at Fitch Ratings.
Overall job losses in the manufacturing, educational services and public administration sectors outweighed gains in the information, business, agriculture and utilities sectors.
The employment rate in January fell 0.1 percentage points to 60.8%, the first such decline since August 2025.
The average hourly wage of permanent employees – a gauge closely tracked by the Bank of Canada to ascertain inflationary trends – dipped to a seven-month low of 3.3%, down from the 3.7% recorded in December.
The central bank held its key policy rate steady at 2.25% last week and said this was about the right level to keep inflation close to its 2% target. Money markets expect rates to stay on hold for the rest of the year.
“One report is unlikely to move the needle for the Bank of Canada. The unemployment rate suggests the labor market is better than expected – but not necessarily tight,” said Andrew Hencic, senior economist at TD Economics.
The Canadian dollar edged up to C$1.3657 to the U.S. dollar, or 73.22 U.S. cents, from C$1.3668, or 73.16 U.S. cents.
(Reporting by David Ljunggren, editing by Dale Smith and Nick Zieminski)
