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Positive Job Print Ends Rollercoaster Week

Canadian Economics

By: Liam Daly

    

  • In January, employment in Canada increased by 76,000, the third consecutive monthly increase. There were notable gains among youth aged 15 to 24 years.
  • The labour force increased by 62,000 and the unemployment rate inched down to 6.6 per cent.
  • Among the goods-producing sectors, manufacturing saw a significant increase of 33,000 jobs. In the service sector, the largest gains were recorded in professional, scientific, and technical services (+21,700), accommodation and food services (+14,900), and transportation and warehousing (+13,200).
  • Across Canada, employment rose in 3 of the ten provinces. Employment increased in Ontario (+39,000), British Columbia (+23,000) and New Brunswick (+2,900). Employment was little changed in the remaining provinces.
  • Year-over-year, the pace of average hourly wage growth fell to 3.5 per cent. This was the slowest pace of wage growth since April 2022 and a further signal that wage growth is cooling in response to slacker labour market conditions.

Insights

The economy continues to churn out jobs, a welcome signal of resilience and recovery. A third consecutive monthly employment increase and weaker labour force growth together helped to reduce the unemployment rate, a trend we expect to continue given the weaker outlook for population growth. A fall in the youth unemployment rate was especially welcome given the outsized surge in 2024. The economy is estimated to be in state of slight excess supply, which is helping to calm upward wage pressures, meaning slower labour cost growth for firms. Despite looming challenges—slowing population growth, persistent trade uncertainty, and a weak Canadian dollar— a stable job market, lower inflation and falling interest rates should help to build business confidence, allowing labour demand to strengthen.

This week, a trade war with the United States was narrowly averted following an eleventh-hour phone call. While the tariffs may be temporarily back on the shelf, growing economic nationalism in the U.S. is reshaping Canada’s most important trading relationship and threatens to send shockwaves throughout the economy. In the labour market, trade barriers would reduce demand and put jobs at risk, particularly in export-sensitive sectors. Manufacturing and wholesale trade are especially exposed, though the impacts would be felt widely. While the ripple effects would spread throughout the economy, acute regional affects would be expected in place where the reliance on U.S. demand is high.

As historic relations and norms are rewritten before our eyes, Canada must adapt to a rapidly shifting, competitive, global environment. Doing so requires a readiness to embrace change, while driving home its competitive advantages. As the most educated country in the G7, growth in high-skilled industries is key. Canada must seek to leverage the education of its workforce in order to develop a stronger foothold in the technological sectors of the future. Doing so requires investment in higher education, rebuilding Canada’s image as a premier destination for international students and strengthening support for high-skilled, intellectual property-producing sectors. By prioritizing these areas, Canada can drive innovation, attract top talent, and secure long-term economic growth.

How should Canada respond to a shifting U.S. trade strategy? See our latest report: Trump, Tariffs and Trade.

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