OTTAWA – Canada’s labor market presented a complex picture in January 2026, as the national unemployment rate fell to 6.5%, down from 6.8% in December. According to the latest Labour Force Survey from Statistics Canada, the economy actually lost 25,000 jobs during the month, marking the first net decline in employment since August. The paradoxical drop in the unemployment rate occurred because approximately 94,000 people stopped looking for work or exited the labor force entirely, causing the participation rate to slip to 65.0%.
The report highlighted that the job losses were primarily concentrated in the private sector and among part-time positions. Demographically, the decline was most significant among women in the core working age of 25 to 54. Conversely, full-time employment actually saw a modest gain of 45,000 jobs, which helped offset some of the steeper losses in part-time work.
The manufacturing sector faced the most severe challenges, shedding 28,000 positions in January alone. This sector has now lost roughly 51,000 jobs over the past year, a downturn that economists largely attribute to the ongoing impact of U.S. trade tariffs on Canadian goods. Other sectors, such as education and professional services, also saw declines, while areas like agriculture and utilities reported slight growth.
Regionally, the job losses were not felt evenly across the country. Ontario experienced a sharp decline of 67,000 jobs, bearing the brunt of the manufacturing slump. In contrast, provinces like Alberta and Saskatchewan saw employment gains of 20,000 and 6,100, respectively. These figures provide the Bank of Canada with a “mixed bag” of data as it considers future interest rate adjustments, balancing a shrinking workforce against a cooling labor market.
