Unemployment Rate in Canada Continues to Decline in January, Strong Job Growth Recorded

OTTAWA—Canada’s unemployment rate unexpectedly fell again, and the economy showed solid job gains, according to data released on Friday. These signs indicate that joblessness is beginning to ease from an eight-year peak, except for the pandemic years, in November.

In January, the unemployment rate was 6.6 percent, slightly lower than the 6.7 percent seen in the previous month, with the economy adding a net 76,000 jobs. While this was slightly lower than the revised 91,000 jobs added in December, it still represented a strong gain.

Analysts surveyed by Reuters had predicted a net increase of 25,000 jobs in January and an unemployment rate of 6.8 percent.

This marks the second consecutive month of decline in the unemployment rate, but the total number of unemployed individuals remained high at 1.5 million, signaling continued elevated joblessness.

According to Statscan, “This indicates that many unemployed individuals are still struggling to find employment, despite recent job growth.”

Canada’s economy faced challenges for most of the previous year, with significant interest rate cuts failing to stimulate consumer spending and business investment.

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The Bank of Canada stated last month that while the job market remained weak, there were signs of improvement due to a total of 200 basis points in rapid rate cuts, which were boosting business activity and consumer spending.

However, the impending threat of tariffs from the United States and a significant decrease in immigration numbers are likely to impact economic activity. A Bank of Canada survey from last month indicated soft hiring intentions among businesses for the year.

Economists have suggested that if tariffs are imposed, the Bank of Canada will need to continue cutting rates.

Senior economist Andrew Grantham from CIBC Capital Markets noted that despite the falling unemployment rate, it remains high, indicating economic slack. He added, “We believe that further interest rate cuts will be necessary for the economy to absorb this slack fully, especially given heightened trade uncertainty that could affect hiring decisions in the future.”

The Canadian dollar saw a marginal 0.1 percent increase against the U.S. dollar, trading at 1.4296, or 69.95 U.S. cents.

The job report led to a reduction in currency swap market bets for a potential 25 basis points rate cut in March, decreasing from 72 percent to 58 percent.

The increase in jobs was evenly distributed between part-time and full-time positions, with notable gains in manufacturing, professional, scientific, and technical services, according to Statscan.

Youth employment, in the age group of 15 to 24, which had a consistently high unemployment rate throughout last year, saw a 1.1 percent increase. The unemployment rate in this category decreased from 14.2 percent to 13.6 percent, as reported by Statscan.

The average hourly wage growth for permanent employees stood at 3.7 percent, slightly lower than the revised 3.8 percent in December. This wage growth rate, closely monitored by the Bank of Canada to gauge inflationary trends, had been slowing down.

The employment rate, representing the percentage of the population aged 15 and older who are employed, increased by 0.1 percentage points to 61.1 percent in January. This marked the third consecutive monthly increase, as per Statscan data.