Canada's Job Market Shifts: Unemployment Drops to 6.5% Despite 25,000 Jobs Lost in January

Canada's Unemployment Rate Ticks Down to 6.5% in January

Canada's unemployment rate ticked down to 6.5 per cent in January, while the economy lost 25,000 jobs, Statistics Canada reported on Friday. This marks the lowest unemployment rate since September 2024, driven by fewer people actively searching for work.

Caption: A Linamar employee assembles components of a light truck transmission on the floor of a factory, in Guelph, Ont. (Evan Mitsui/CBC)

Key Factors Behind the Job Losses

The job losses were mostly due to a decline in part-time work, which fell by 1.8 per cent. In contrast, full-time work saw a 0.3 per cent gain. The number of people who were neither employed nor looking for work increased in January on a year-over-year basis.

Sector and Regional Breakdown

Manufacturing, educational services, and public administration drove the majority of the job losses. On the positive side, jobs were gained in:

• Information, culture, and recreation
• Business, building, and other support services
• Agriculture
• Utilities

Regionally, employment fell by 67,000 in Ontario, while Alberta gained 20,000 jobs, Saskatchewan gained 6,100 jobs, and Newfoundland and Labrador gained 3,800 jobs.

Wage Growth and Economic Outlook

Average hourly wages increased by 3.3 per cent, or $1.18, bringing the total to $37.17 an hour compared to the same period last year.

Andrew Grantham, senior economist at CIBC Capital Markets, noted in a client note: "Overall, today's employment report was very much a mixed bag, with both employment and unemployment apparently declining in the same month. As a result, 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."

Private vs. Public Sector Trends

The number of private-sector employees fell by 52,000, partly offsetting gains made during the last three months of 2025. The number of public sector employees saw little change.