Canada's labor market weakened markedly in February, with Statistics Canada reporting a net reduction of 83,900 payroll positions and an increase in the unemployment rate to 6.7%.
Statistics Canada noted that a monthly decline of this magnitude, excluding pandemic lockdown months, has not been seen in almost 17 years. The February outcome diverged sharply from market forecasts, which had anticipated an increase of 10,000 jobs and an unemployment rate of 6.6%.
In context, the economy had already lost 24,800 jobs in January and recorded an unemployment rate of 6.5% for that month, a 16-month low. With the combined losses in January and February, the Canadian labor force has shed 109,000 positions, nearly offsetting the 189,000 jobs gained between September and December of the prior period.
Sector and demographic breakdown
Job losses were distributed across both the goods-producing and services sectors. The goods-producing segment lost 27,900 positions. The services sector, typically more resilient, experienced a larger contraction of 56,200 jobs.
The decline was concentrated among full-time workers, who saw a net drop of 108,400 jobs in February. Private sector employment fell by 72,600, and government payrolls decreased by 17,100.
On a demographic basis, youth unemployment rose to 14.1% in February, a level close to the high seen in September of last year. Workers in the 25 to 54 age bracket - the core-aged cohort - also saw employment fall by 37,000, the largest monthly decline for that group since January 2022.
Wages and inflation considerations
The report showed a notable rise in average hourly wages for permanent employees, a metric closely watched in Canada for signs of inflationary pressure. That measure climbed by nine percentage points to 4.2%, the highest reading since October 2024. Statistics Canada highlighted the increase as a potentially complicating factor for efforts to curb inflation.
Policy context and outlook
Statistics Canada and official commentary pointed to external headwinds tied to tariffs as weighing on growth in sectors such as steel, autos, lumber and copper. The report said that economic growth has sputtered amid a range of tariffs, and that the knock-on effects from these sectors have largely been contained to date.
Nevertheless, the Bank of Canada and economists have warned that further job losses are possible as businesses scale back investments and announce layoffs.
Summary takeaway
February's employment report paints a weaker-than-expected picture for Canada’s labor market: broad-based job losses across sectors and demographics, falling full-time and private sector employment, and a simultaneous rise in average hourly wages for permanent employees. The data add to concerns about near-term labor market resilience and the potential for additional job cuts amid investment pullbacks and tariff-related pressures.