Canada’s Unemployment Rate Falls to 6.5% Despite Employment Decline in January 2026

Canada’s labour market showed mixed signals in January 2026, as employment declined by 25,000 jobs, yet the national unemployment rate dropped to 6.5 percent, the lowest level recorded since September 2024. The decrease in unemployment was primarily driven by fewer individuals actively seeking work rather than large-scale job growth.

While the headline unemployment rate improved, labour force participation also declined, indicating that workforce engagement remains an important factor shaping employment trends.

Sector-Specific Employment Changes

Manufacturing and educational services experienced the largest employment declines during the month, while gains were recorded in agriculture, utilities, and information-related industries. These shifts highlight how sector-specific economic conditions continue to influence national employment patterns.

Average hourly wages continued to grow steadily, rising 3.3 percent year-over-year to reach 37.17 dollars per hour, suggesting that wage stability remains intact despite employment fluctuations.

Regional Labour Market Variations

Provincial employment trends varied widely. Ontario recorded the largest employment drop, losing approximately 67,000 jobs, while Alberta, Saskatchewan, and Newfoundland and Labrador experienced modest job gains. These regional differences reflect ongoing variations in economic activity, industrial performance, and workforce demand across Canada.

What the January Data Signals for the Labour Market

The combination of a declining unemployment rate alongside falling employment underscores the complexity of Canada’s labour market outlook. Population aging, labour force participation trends, and sector-specific hiring patterns continue to shape employment outcomes more than short-term hiring cycles alone.

For policymakers and employers, the data suggests that maintaining workforce participation and addressing regional labour shortages will remain key priorities moving into 2026.

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