Ottawa, ON, Canada (WNEWS CANADA) – At the beginning of 2026, Canada’s job market had mixed results. Statistics Canada reported that the national unemployment rate dropped to 6.5 percent in January, but both the number of people working and the employment rate also fell. This shows the job market is weaker than the lower unemployment rate suggests. In January, fewer Canadians had jobs, even though the unemployment rate fell.

The January Labour Force Survey found that total employment fell by about 25,000. The employment rate fell to around 60.8 percent, down 0.1 points from December. The lower unemployment rate was mostly because fewer people were in the labour force, not because more people found jobs. Some people may have left the workforce because they retired, felt discouraged about job prospects, or returned to school.

Why Unemployment Fell Despite Job Losses

Normally, a lower unemployment rate means the job market is stronger. But in January, the rate fell because fewer Canadians were looking for work.

Statistics Canada said the labour force participation rate dropped to about 65.0 percent, continuing a recent trend. When people stop looking for work, they are no longer counted as unemployed. This lowers the unemployment rate, even if fewer people have jobs.

Economists warn that this situation can hide bigger problems, especially when the employment rate is also declining. For everyday Canadians, a falling employment rate can mean less job security and fewer opportunities to find work. This can slow economic growth, make it harder for people to advance in their careers, and create uncertainty about the future.

Indicators of Labour Market Health

The employment rate, which measures the share of people aged 15 and over with jobs, has fallen in three of the last four months.

• October 2025: approximately 61.1%
• November 2025: approximately 61.0%
• December 2025: approximately 60.9%
• January 2026: approximately 60.8%

This slow drop means job growth has not kept up with population growth over the past year. Since early 2024, the employment rate has declined by about 0.6 to 0.7 percentage points, indicating the job market is cooling.

Sector and Regional Patterns Remain Uneven

Most of January’s job losses were in manufacturing, especially in Ontario, because of weak global demand and trade uncertainty. Part-time jobs fell, while full-time jobs rose slightly, showing that labour demand remains uneven. Fewer people worked in manufacturing (-28,000; -1.5%), educational services (-24,000; -1.5%), and public administration (-10,000; -0.8%). At the same time, more people were employed in information, culture and recreation (+17,000; +2.0%), business, building and other support services (+14,000; +2.1%), agriculture (+11,000; +4.5%), and utilities (+4,200; +2.5%).

Across Canada, Ontario saw the largest drop in jobs, while Alberta, Saskatchewan, and Newfoundland and Labrador saw small gains. Even with these gains, national trends are still slowed by fewer people joining the largest job markets.

Broader Context: A Labour Market Losing Momentum

Over the past six months, Canada’s labour market has shown signs of losing momentum:

• Employment growth has stalled after modest gains earlier in 2025
• The employment rate has trended lower alongside rapid population growth.
• Participation rates have slipped as some workers exit the labour force or delay job searches.

Overall, these trends show the labour market is cooling slowly, not collapsing. However, it is not creating enough jobs to raise living standards or keep up with population growth.

Outlook for the Months Ahead

A report from Trading Economics says Canada’s unemployment rate went up to 6.8% in December 2025, from 6.5% the month before. This happened because more people started looking for work. Analysts say future job reports will be watched closely for signs of stability or more decline. Changes in participation could affect unemployment numbers, even if job conditions stay the same. If discouraged workers come back to the job market, the unemployment rate could rise, even if there are no new job losses.

For now, January’s data backs up what many economists are saying: Canada’s job market is getting weaker beneath the surface, and the main unemployment numbers might not show the whole story.