How the Canadian labour market beat economist expectations

Workers stack and sort softwood lumber at Groupe Crete, a sawmill in Mont-Blanc, Que., Monday, Jan. 20, 2025. THE CANADIAN PRESS/Christinne Muschi

OTTAWA — Canada’s unemployment rate ticked down in January as the labour market added 76,000 jobs, beating economist expectations for the month.

The jobless rate ticked down 0.1 percentage points to 6.6 per cent, marking the second straight monthly decline after peaking at 6.9 per cent in November, Statistics Canada reported on Friday.

Economists polled by Reuters had expected about a third of that job growth, and for the unemployment rate to rise slightly.

“Overall, this is clearly a very positive report once again,” said Andrew Grantham, senior economist at CIBC Capital Markets, in a note to clients.

“However, even after the improvement seen during the past two months, the unemployment rate is still only just back to where it stood in October, and is still consistent with a labour market with plenty of slack.”

The manufacturing sector carried the largest employment gains, adding 33,000 jobs — a third of those in Ontario alone. Though the sector’s gains were little changed year-over-year, adding 28,000 jobs since January 2024.

Statistics Canada highlighted the manufacturing sector in its monthly report, saying nearly 40 per cent of the 1.9 million manufacturing jobs depend on U.S. demand for Canadian exports.

In the automotive sector, nearly 70 per cent of manufacturing jobs depend on U.S. demand.

The relevance of the figures comes amid economic tensions between the two countries, where U.S. President Donald Trump has threatened a 25 per cent tariff on all imported Canadian goods.

Trump paused his tariff plan for a month on Monday after commitments from Canada to designate cartels as terrorist entities, and appoint a “fentanyl czar” to act as a liaison between the two countries, among other commitments.

Meanwhile, across all sectors, full-time employment rose by 35,000 in January, with another 40,900 part-time jobs.

The public sector lost 8,400 jobs in the month, however, and wage growth continued to decelerate in January, the report said.

Hourly wages increased at a rate of 3.5 per cent year-over-year in January, down from four per cent growth in December.

Royce Mendes, managing director and head of macro strategy at Desjardins, said the Bank of Canada might choose to hold interest rates steady at its meeting in March if no tariffs are implemented before then.

“With inflation holding steady around the two per cent target and wage growth cooling to an annual pace of just 3.5 per cent in today’s numbers, the good news is that central bankers have some flexibility to respond if a shock hits the economy,” he said.

“Rates have risen across the Government of Canada yield curve and the Canadian dollar has appreciated in light of the surprisingly strong data.”

This report by The Canadian Press was first published Feb. 7, 2025.

This is a corrected story. In a previous version, the November unemployment rate didn’t reflect the revised number.