Canada’s labour market lost momentum in January, with employment down by 25,000 and the employment rate slipping to 60.8 percent, the first decline since August. The unemployment rate fell to 6.5 percent, but the improvement came mainly because fewer people were looking for work, not because more jobs were created.
Nearly 94,000 people stopped searching for work during the month, pushing the labour force participation rate down to 65.0 percent. Ontario accounted for much of the decline. As a result, the drop in unemployment reflects withdrawal from the labour market rather than stronger hiring conditions.
Ontario posted the sharpest job losses, shedding 67,000 positions in January, and the unemployment rate fell to 7.3 percent as participation dropped by a full percentage point. The pullback was most pronounced among youth, whose participation rate fell 2.7 percentage points, raising concerns about job opportunities for younger workers.
Labour market conditions were stronger in parts of Western and Atlantic Canada. Alberta added 20,000 jobs, continuing steady gains seen over the past year. Saskatchewan and Newfoundland and Labrador also recorded increases, contributing to lower unemployment rates in both provinces. However, they were not enough to offset weakness in central Canada.
Manufacturing recorded the largest industry losses, with employment down 28,000 in January. Educational services and public administration also saw notable job losses, suggesting ongoing adjustment after earlier public-sector expansion.
Among demographic groups, employment fell sharply for core-aged women, down 27,000 in January. Employment for other major groups was largely unchanged. The drop among core-aged women coincided with continued pressures related to caregiving and health, which remain common reasons for being outside the labour force.
Wage growth showed further signs of cooling. Average hourly wages rose 3.3 percent from a year earlier, slightly slower than in December and well below the pace seen during earlier inflation spikes. Slower wage growth alongside declining employment suggests easing demand for labour rather than improved balance in the job market.
Worker confidence also appears fragile. The share of permanent employees planning to leave their jobs over the next year rose to 7.1 percent. The increase was most noticeable among youth, but intentions to leave also rose among core-aged workers, especially in industries tied closely to US demand for Canadian exports.
Overall, January’s labour data point to a market that is softening beneath the surface. Lower unemployment masks falling participation, regional disparities and growing uncertainty among workers, particularly in Ontario and in export-dependent industries.