(Feb 6): The Canadian economy shed 24,800 jobs last month, with the largest employment losses in manufacturing as US tariffs continue to take a bite out of the sector.
However, the impact of the job losses on the unemployment rate was counterbalanced by fewer people looking for work, allowing the rate to fall to 6.5%, Statistics Canada’s labour force survey showed on Friday.
Economists surveyed by Bloomberg were expecting a slight employment increase of 5,000 and for the jobless rate to hold steady at 6.8%.
January’s employment decline was the steepest since August, with Ontario’s labour market taking the largest hit, losing 67,000 jobs. President Donald Trump’s tariffs have been particularly punishing for Canada’s most populous province, which is home to the country’s automotive sector.
Last week, General Motors Co officially laid off 500 workers at its plant in Oshawa, Ontario, as it shut down one of its shifts.
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Nationally, manufacturing jobs have declined by 51,000 since January 2025. The drop last month of 27,500 positions was the biggest since April 2020.
The loonie extended the day’s gains versus the US dollar after the release, rallying some 0.4% to C$1.3661 as of 8.35am in Ottawa. Canadian bond yields climbed on the data, with the benchmark 10-year yield up about two basis points to 3.41%. Traders continue to see a small chance of an interest-rate hike from the Bank of Canada by the end of the year.
Additional data collected in January’s labour force survey suggests the trade war may be pushing some workers in industries dependent on the US to consider leaving their jobs.
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According to the report, 5.4% of permanent core-aged employees in industries dependent on US demand for Canadian exports were planning to leave their jobs over the next 12 months. That proportion was up 1.5 percentage points from a year ago, compared to a smaller increase of 0.7 percentage points for workers in other industries.
“In prior years, the share of permanent employees who were planning to leave their job had been lower among employees working in industries dependent on US demand for Canadian exports. These employees are more likely to have full-time hours and above-average wages relative to other industries,” Statistics Canada said.
Meanwhile, January’s decline in the unemployment rate is attributed to fewer Canadians looking for work last month, with the labour force participation rate declining by 0.4 percentage points to 65% — the lowest since 2021.
According to Statistics Canada, there were 12.4 million people aged 15 and older who were not participating in the job market last month, up 2.7% from a year ago.
The decline in the labour force participation rate — which fell to the lowest since 2021 — coincides with an ageing population and federal curbs on immigration.
Canada’s labour force shrank by 119,000 people last month, the most in five years.
Youth aged 15 to 24 were the only demographic in the labour force to decline in population since January 2025.
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Average hourly wage growth of permanent employees slowed to 3.3% in January, from 3.7% the previous month.
“This is a weak report,” Charles St-Arnaud, chief economist at Servus Credit Union, said in an email. “While one month of data doesn’t make a new trend, it also suggests that the strength in employment seen in the fall of 2025 was unsustainable given the weakness in economic activity.”
Statistics Canada data on gross domestic product by industry suggest the economy contracted 0.5% in the fourth quarter.
For the Bank of Canada, the labour market remains a key focus given its potential spillover to the rest of the economy, St-Arnaud said. “Nevertheless, it will likely require further weakness in the economy to trigger a rate cut.”
In a speech on Thursday, governor Tiff Macklem warned that cutting interest rates during a supply-side shock to the economy risks stoking inflation.
The jobs report was a “mixed bag,” Andrew Grantham, economist at Canadian Imperial Bank of Commerce, said in a report to investors. “We doubt this will have much impact at the Bank of Canada, and it doesn’t change our view that interest rates will be on hold for the remainder of this year.”
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