Canada’s job surge exceeded expectations in January, but trade war uncertainty caused a shadow

After earning 91,000 in December, Canada’s employment increased by 76,000 jobs, starting in 2025. This marks a second straight month of increase in monthly employment hours of at least 0.4%.

The spike caught many economists off guard, with Royal Bank of Canada economists expected to add only 15,000 jobs, while Scotiabank’s Derek Holt is expected to range from 15,000 to 76,000.

Bond yields rose to 2.75, up 0.12, or 4.63%, while the Canadian dollar was better than expected.

Unemployment in the country fell 0.1% to 6.6%, while labor force participation surged to 65.5%, higher than 65.1%, according to Statistics Canada.

“Three consecutive months of job growth have shown that the Canadian economy has been boosted from lower interest rates,” Leslie Preston of TD Economics wrote in a research note. The periodic improvement is obviously taking effect.”

Statistics Canada reported that of the proceeds, 35,200 were full-time positions. In addition, the total number of hours of healthy growth increased by 0.9% in a month.

Canada’s 15- to 24-year-olds have a huge employment rate, increasing 31,000 jobs, an increase of 1.1%. According to Statistics Canada, youth employment also rose 0.6 percentage points, and also rose 54.5% in January, the first increase since April 2024.

Areas leading job growth include manufacturing (+33,000 jobs), professional, scientific and technical services (+22,000 jobs), construction (+19,000 jobs), and accommodation and food services (+15,000 jobs ).

Trade war involves covering up strong job growth

Despite the significant increase in employment, economists warn that the potential threat of the trade war has a shadow on positive news.

“If we don’t absorb the possibility of a trade war, we will talk about a comeback in Canada’s domestic economy in recent months,” wrote BMO economist Douglas Porter.

Statistics Canada emphasized in its release that manufacturing, which added 33,000 jobs this month, accounts for 8.9% of the country’s total employment. This makes it “particularly vulnerable to changes in tariffs and foreign demand,” the agency noted.

Statistics Canada also noted that approximately 641,000 manufacturing jobs, or 39.4% of the industry, depend on U.S. demand for Canadian exports.

Trade risks keep tax rates alive

TD’s Preston noted that interest rates for Canadian banks are now low enough to no longer drag the economy down.

“Now the Canadian government is doing its best to face the threat of tariffs and improve the competitiveness of the economy,” she wrote.

BMO’s porters responded to the attention. “Las, we still need to compete with the lingering uncertainty in trade, which casts a cloud over these sunny working figures,” he wrote. “For Canadian banks, there is little here Speak up in search of further near-term interest rate relief, but clear and current trade risks will keep interest rates hopeful.”

The number of jobs south of the U.S. border has also increased, although slightly lower than expected. In January, total non-agricultural wage employment rose by 143,000, which is the expected 170,000 new jobs.

As a result, the U.S. unemployment rate dropped to 4.0%, its lowest level in eight months.

Thomas Feltmate of TD Economics believes the latest figures show that “the hiring momentum is stronger than expected late last year,” with an average of 204,000 jobs per month in the fourth quarter.

But like Canada, the tariff threat remains a key factor in U.S. policy decisions, especially in recent months, with increasing uncertainty over the distance the new administration will face in the trade war.

“As inflation progresses, which has stalled in recent months and raised uncertainty about the distance the new administration will involve tariffs, he wrote: “The Fed may be more cautious until sometime this summer. , the policy rate is stable. “

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Last modified: February 7, 2025