Canada’s unemployment rate unexpectedly fell and the economy posted another solid month of job gains, Statistics Canada said on Friday, signalling that joblessness has started to ease.
In January, the unemployment rate was 6.6 per cent, a notch below the 6.7 per cent seen a month earlier. The economy added 76,000 jobs — still a robust gain, though slightly down from a revised 91,000 jobs added in December.
Analysts polled by Reuters were expecting 25,000 jobs added in January and the unemployment rate at 6.8 per cent.
This was the second month in a row that the unemployment rate, or the number of jobless people as a percentage of the total labour force, declined. However, the total number of unemployed people stayed at a high of 1.5 million.
“The labour market shrugged off the uncertainty swirling around the economy, kicking off 2025 with strong job growth for a second straight month,” wrote Brendon Bernard, senior economist at Indeed.
“Like December, the employment gains well outpaced population growth,” he wrote. “The labour market has a ways to go before we start declaring it strong again, but the swing in momentum is still quite welcome, given the negative trends facing job seekers over most of 2024.”
Youth unemployment drops, wage growth at 3.7%
Canada’s economy has been teetering for most of last year. The Bank of Canada said last month that while the job market remained soft, there were signs of improvement that its rate cuts were helping business activity pick up and boosting consumer spending.
A looming threat of tariffs from the U.S. and a sharp drop in immigration numbers, however, are likely to impact economic activity, and businesses have reported soft hiring intentions for the year, a central bank survey showed last month.
Andrew Grantham, senior economist with CIBC Capital Markets, said that even though the unemployment rate has been falling, it was still elevated and indicated slack in the economy.
“We continue to think that even lower interest rates will be needed for the economy to fully absorb that slack, particularly given heightened trade uncertainty, which could impact hiring decisions ahead,” he said.
The number of job additions were largely balanced between part-time and full-time positions, Statistics Canada said, adding that the gains were primarily seen in manufacturing, professional, scientific and technical services.
Youth unemployment, which covers those aged 15 to 24, had been chronically high most of last year. That rate dropped to 13.6 per cent from 14.2 per cent, and employment numbers for the same demographic increased by 1.1 per cent, Statistics Canada said.
The average hourly wage growth for permanent employees was at 3.7 per cent, slightly down from the revised 3.8 per cent in December. The wage growth rate, which is closely watched by the BoC to gauge inflationary trends, had been slowing.
The employment rate, or the proportion of the population aged 15 and older who are employed, increased 0.1 percentage points to 61.1 per cent in January, marking the third consecutive monthly increase, the data showed.
