Canada: Bad Weather Likely Kept Workers and Job Seekers at Home in January

Canadian employment fell in January, a U-turn following the four straight months of gains previously. January’s decline was entirely in Ontario (-66.5k), possibly due to poor weather conditions, while Alberta gained 20k positions and the rest of the country accounted for the remaining 21k new jobs. Manufacturing job losses totalling 27.5k brought employment in this sector back to March 2023 levels. Education (-24k) and public administration (-10k) also saw large job losses last month, partly offset by gains in information, culture and recreation (+17k) as well as agriculture (+11k). With another shift from part-time (-70k) to full-time (+45k) positions, Canada reached a new high-water mark in the number of full-time jobs. January’s average wage growth was 3.3% y/y versus 3.4% in December, approaching lows reached in summer 2025. This was well down from the elevated levels of over 5% that characterized the post-pandemic period but still ahead of our outlook for inflation. 

The unemployment rate for core-aged workers fell by 0.5 percentage points to 5.5% in the month—the lowest since August 2024 (graph 1). For youth it fell 0.5 percentage points to 12.8%, remaining below the high of 14.6% in September 2025. But this should not be taken as good news, as falling unemployment rates were driven by nearly 120k people giving up their search for work, largely in Ontario, a likely side-effect from bad weather. Long‑term unemployment remains elevated and rising, with more than 1 in 4 core‑aged job searchers experiencing at least 6 months of unemployment—the highest level since September 2021 (graph 2). The number of people unemployed as a result of permanent layoffs declined slightly in January, while temporary layoffs rose. 

Population numbers for youth (ages 15 to 24 years) from the Labour Force Survey have been declining since September 2025, and now core-aged adults (ages 25 to 54 years) have followed suit (graph 3). Recent work by Desjardins Economic Studies External link. found that Canada’s population could decline for two consecutive years due to the more restrictive immigration policy targets, before advancing again. That said, the road to achieving the government’s ambitious targets may prove difficult.

With inflation hovering around the Bank of Canada’s 2% target, the unusual January jobs data probably didn’t move the needle much for rate cuts. We expect the Bank to keep policy rates on hold at its next meeting and for the foreseeable future.