Canada Loses 25,000 Jobs as Manufacturing Reels from U.S. Tariffs

Canada's economy shed 25,000 jobs in January 2026, marking the first net employment loss since August, according to Statistics Canada's labour force survey released Friday. Manufacturing drove the majority of losses as U.S. tariffs continued battering the sector.

Despite the job losses, the unemployment rate paradoxically fell to 6.5% — a 16-month low — because 119,000 fewer Canadians were looking for work. Bradley Saunders, North America economist at Capital Economics, noted this was the largest monthly decline in the labour force in five years.

The employment rate decreased 0.1 percentage points to 60.8%, while the number of people actively searching for work dropped by 94,000 — a 6.1% decline.

Manufacturing Bears the Brunt

Manufacturing shed 28,000 jobs in January alone — a 1.5% monthly drop. The sector has now lost roughly 51,000 positions over the past year, with U.S. tariffs hammering Canadian industry since spring 2025.

Last week, General Motors laid off 500 workers at its Oshawa plant in Ontario and closed one of its shifts — a direct casualty of trade tensions.

According to Canadian HR Reporter, U.S. tariffs are reshaping employment patterns across key Canadian sectors, with manufacturing workers facing the steepest challenges.

Ontario Hit Hardest

Ontario's labour market took the biggest hit, losing 67,000 jobs in January — the largest provincial decline. As the center of Canada's auto industry, the province has been particularly vulnerable to President Trump's tariff policies.

The labour force participation rate in Ontario fell by 1.0 percentage points to 64.4%. Among youth aged 15 to 24, participation dropped 2.7 percentage points to 58.9%.

Not all provinces suffered equally. Alberta added 20,000 jobs (+0.8%), bringing net gains over the past year to 86,000 (+3.4%). Saskatchewan gained 6,100 positions (+1.0%) and Newfoundland and Labrador added 3,800 (+1.6%).

Private Sector Shrinks While Public Sector Holds

The private sector bore the pain in January, losing 52,000 jobs (-0.4%) — partially offsetting a net increase of 128,000 positions in the final quarter of 2025.

Public sector employment showed modest gains (+13,000; +0.3%), as did self-employment (+14,000; +0.5%).

Beyond manufacturing, educational services cut 24,000 jobs (-1.5%) and public administration shed 10,000 positions (-0.8%). On the positive side, information, culture and recreation added 17,000 jobs (+2.0%) and business support services gained 14,000 (+2.1%).

Youth Unemployment Improves

The youth unemployment rate fell 0.5 percentage points to 12.8% in January, down from a recent peak of 14.6% in September 2025. However, the improvement came because fewer young people were searching for work rather than finding employment.

The number of employed youth was little changed month-over-month, according to Statistics Canada.

Underlying Concerns Remain

Economists warn the headline improvement in unemployment masks deeper problems.

"While it is positive news that the unemployment rate has edged down from its peak in mid-2025 to 6.5% in January 2026, the underlying drivers of this decline are less encouraging," said Anupriya Gangopadhyay, economist at the Canadian Chamber of Commerce.

She noted that "even after nine months of U.S. tariffs, employment in the Canadian manufacturing sector continues to decline."

According to RBC Economics, Canada's labour market dynamics are shifting. With population growth stalling and an aging population pushing participation rates lower, the country's breakeven employment growth rate is on track to be slightly negative — about -10,000 jobs per month on average in 2026.

This means smaller job gains or even small declines may still be enough to move unemployment lower, a sharp contrast to 2023-2025 when solid job growth wasn't enough to absorb new market entrants.

What This Means for Canadian Workers

For job seekers navigating this uncertain market, the data suggests several trends:

Manufacturing remains vulnerable. Nine months of U.S. tariffs have eliminated over 50,000 manufacturing jobs with no clear end in sight. Workers in automotive and related industries face ongoing uncertainty.

Geographic disparities are widening. While Ontario struggles, western provinces like Alberta and Saskatchewan continue adding jobs. Workers willing to relocate may find more opportunities.

The "shadow unemployment" problem. The falling unemployment rate masks the reality that many Canadians have simply stopped looking for work. The 119,000-person labour force decline suggests discouragement rather than improvement.

Public sector stability. Government employment has held relatively steady while private sector positions contract.

People Also Asked

Q: Why did Canada's unemployment rate drop despite losing jobs?

A: The unemployment rate fell because 119,000 fewer Canadians were actively looking for work in January. This was the largest monthly decline in the labour force in five years. When people stop searching for jobs, they're no longer counted as unemployed.

Q: How have U.S. tariffs affected Canadian manufacturing?

A: Manufacturing has lost roughly 51,000 jobs over the past year since U.S. tariffs took effect. January alone saw 28,000 manufacturing job cuts. Ontario's auto industry has been hit particularly hard, with GM laying off 500 workers at its Oshawa plant.

Q: Which Canadian provinces are adding jobs?

A: Alberta led job gains with 20,000 new positions in January and 86,000 over the past year. Saskatchewan added 6,100 jobs and Newfoundland and Labrador gained 3,800. Ontario lost 67,000 jobs — the largest provincial decline.

Looking for your next opportunity? Metaintro surfaces verified roles you won't find on traditional job boards.