Canada's unemployment rate dipped to 6.5% in January, according to Statistics Canada, despite the economy experiencing a net loss of 25,000 jobs. The surprising decline from 6.8% in December is attributed to a decrease in the number of individuals actively seeking work. This paints a complex picture of the Canadian labour market at the start of 2026.
The job losses were largely concentrated in the private sector and among part-time positions, particularly affecting women aged 25 to 54. The manufacturing sector also faced significant setbacks, with a loss of 28,000 positions in January and a total decrease of 51,000 jobs compared to the previous year. This decline predates the implementation of U. S. tariffs, suggesting other factors are also impacting the industry. The January figures mark the first net loss of jobs since August.
While the unemployment rate decrease might seem positive, economists caution against overlooking the underlying factors. TD Economics anticipates a slowdown in job growth for 2026 and 2027, projecting a decrease from 300,000 in 2025 to between 75,000 and 100,000. They attribute this to softening demand and only a muted recovery in the job vacancy rate. The Bank of Canada is expected to maintain its current monetary policy, awaiting further evidence of significant changes in the economic outlook.
Some economists are raising concerns about the overall health of the Canadian economy. David Rosenberg, chief economist at Rosenberg Research, suggests Canada is on "recession watch" for 2026, pointing to weak growth and a struggling Canadian dollar. Despite recent interest rate cuts by the Bank of Canada, the economy continues to show signs of weakness, raising questions about future policy directions.
