Canada’s economy lost 25,000 jobs in January, but unemployment rate ticked

The Canadian employment landscape was a mixed bag in January, with the economy losing 25,000 jobs but the unemployment rate cooling to 6.5 per cent, Statistics Canada said on Friday.

The jobless rate — its lowest since September 2024 — was the result of fewer people actively searching for work, according to the data agency.

The labour force participation rate declined to 65 per cent. But there was also a year-over-year rise in the number of people who were neither employed nor looking for work in January.

WATCH | The Canadian employment landscape was a mixed bag last month:

Canada’s economy loses 25,000 jobs in January

Canada’s economy lost 25,000 jobs in January, mostly due to a decline in part-time work, Statistics Canada said Friday. The unemployment rate ticked down to 6.5 per cent — the lowest since September 2024 — as a result of fewer people actively searching for work.

Manufacturing drove the majority of the job losses, another hit to a sector that has been battered by U.S. tariffs over the last 10 months. Educational services and public administration also saw a decline in employment.

“Is this bad news (drop in employment, with notable weakness in manufacturing) or good news (bigger drop in the unemployment rate, and a rise in hours worked)? Clearly, the answer is ‘both,’ though leaning bad,” wrote Douglas Porter, chief economist at BMO, in a note to clients.

The report reflects an economy that is adjusting to three major changes at once, explained Porter: U.S. tariffs, which have debilitated Canada’s manufacturing sector; an “abrupt slowdown” in population growth; and a rise in the 65 and older population.

“Given the latter two forces, the equilibrium, or natural, unemployment rate is probably drifting lower, so the underlying cooling in jobs and hours worked would normally suggest that the Bank should be biased to ease policy,” he wrote.

But Bank of Canada governor Tiff Macklem has made it clear that it will take a lot to shift the central bank from holding the key interest rate, “and this mixed and weather-affected report will not qualify,” said Porter.

The job losses seen in January were mostly driven by a decline in part-time employment, which fell by 1.8 per cent. This was partly balanced by a slight gain in full-time work.

The number of private-sector employees fell by 52,000, partly offsetting increases made during the last three months of 2025. The number of public sector employees saw little change.

Jobs were gained in information, culture and recreation; business, building and other support services; agriculture; and utilities.

Employment fell by 67,000 in Ontario, with job losses in manufacturing largely concentrated in this province. Meanwhile, Alberta gained 20,000 jobs, Saskatchewan gained 6,100 jobs and…