Canadian Employment (January 2025)

Another positive surprise for Canada's job market in January

• The Canadian labour market's solid job gains carried over into 2025, with 76k new jobs beating expectations. Job gains were split between full (+42.3k) and part-time (+38.6k) positions. 
• The healthy job gain pushed the unemployment rate down another 0.1 percentage point to 6.6%. 
• Following a period where labour force growth was outpacing job creation, the proportion of the population aged 15+ with a job has now risen for three consecutive months. And this has occurred across age cohorts: youth (15-24 years), core age (25-54 years) and older people (55-64) have all seen their employment rates rise. 
• Employment gains across industries were mixed. Gains were led by manufacturing (+33k), professional, scientific and technical services (+21.7k), construction (+19.3k) and accommodation and food services (+14.9k). Meanwhile, other services (-13.9k), educational services (-7.9k) and business building and other support services (-7.4k) led the declines.
• Given the threat of tariffs in the spotlight, Statistics Canada included a feature on manufacturing employment, which accounts for 8.9% of total employment in Canada. Specifically, 39.4% of manufacturing jobs depend on U.S. demand for Canadian exports, or roughly 641k jobs. 
• Lastly, total hours worked jumped a massive 0.9% month-on-month, pointing to solid economic growth on the month. Meanwhile wage inflation continued to cool. Average hourly wages were up 3.5% year-on-year in January (from 4.0% in December).             

Key Implications

• Three consecutive months of solid job growth suggests the cyclical boost to Canada's economy from lower interest rates is clearly taking effect. Unfortunately, the imminent threat of tariffs hanging over the Canadian economy, is likely to temper business confidence and could weigh on hiring in some sectors in the coming months.
• The Bank of Canada continued to lower interest rates in January, such that interest rates are no longer a drag on the economy. Now it is over to Canadian governments to do what they can (see commentary) to improve the competitiveness of the economy in the face of the tariff threat. 

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