Canada's job market presented a mixed picture in January 2026, with a loss of 25,000 jobs alongside a decrease in the unemployment rate to 6.5%. Statistics Canada's Labour Force Survey indicated that the jobless rate fell to its lowest level since September 2024, despite the job losses. The decline in the unemployment rate is attributed to fewer people actively seeking employment.
The contraction in the labor force pushed the participation rate down to 65.0%, from 65.4%. While net employment decreased, full-time work actually increased by 45,000 positions, offsetting a decline of 70,000 part-time jobs. This suggests a shift towards more stable employment despite the overall losses.
Manufacturing experienced the most significant job losses, shedding 28,000 positions. This sector has been struggling with the impact of U. S. tariffs over the past several months. Other sectors that saw declines included educational services and public administration. However, there were gains in information, culture and recreation, business, building and other support services, agriculture, and utilities. Regionally, Ontario experienced the largest decrease in employment, while Alberta, Saskatchewan, and Newfoundland and Labrador saw increases.
TD Economics Senior Economist Andrew Hencic noted that Canada's population is expected to shrink in 2026, which could lead to a continued decrease in the unemployment rate even if job losses persist. Desjardins economist Kari Norman suggested that the government's move to reduce immigration could be a factor in the slower growth of Canada's labor pool. Despite the mixed data, analysts believe the Bank of Canada is likely to hold interest rates steady.
