Canada's job market demonstrated unexpected strength in January, adding 76,000 new positions even as the country faces potential trade tensions with the United States. The unemployment rate dropped to 6.6%, continuing a positive trend for the third consecutive month.
The manufacturing sector led the gains with 33,000 new jobs, with Ontario claiming one-third of those positions. This comes at a sensitive time, as U.S. President Donald Trump has threatened to impose 25% tariffs on Canadian imports, which could particularly impact manufacturing jobs heavily dependent on U.S. trade.
Ontario emerged as the provincial leader in job creation with 39,000 new positions, followed by British Columbia with 23,000 jobs. The employment surge included both full-time (35,000) and part-time (40,900) positions, though the public sector saw a reduction of 8,400 jobs.
Young workers aged 15-24 saw notable improvements, with their unemployment rate falling to 13.6% from 14.2% in December 2024. Average hourly wages rose by 3.5% year-over-year to $35.99, showing a slight cooling from December's 4.0% increase.
Economic experts remain cautiously optimistic but acknowledge the looming threat of U.S. tariffs. BMO chief economist Doug Porter noted that while recent job growth signals economic recovery, trade uncertainties cast a shadow over these positive developments.
Trump recently paused his tariff plan for one month after Canada agreed to several commitments, including designating cartels as terrorist entities and appointing a "fentanyl czar" to coordinate with the U.S.
The robust employment data may influence the Bank of Canada's upcoming interest rate decisions, with some economists suggesting these strong numbers could reduce the likelihood of rate cuts in March, barring any dramatic shifts in trade relations with the U.S.