Canada’s Labour Market Update: January 2026
Canada’s labour market started 2026 with a contradictory set of signals. According to the latest Labour Force Survey from Statistics Canada, employment declined in January even as the unemployment rate fell. Compared with December, the key shift was not hiring momentum, but a pullback in labour force participation. For employers, this distinction matters. Headline unemployment figures alone do not tell the full story about labour availability or hiring conditions.
Key Takeaways for Employers
- Hiring is slowing, but not stopping. Job losses were driven by part-time roles, while full-time employment increased, signaling more selective and cautious hiring.
- Lower unemployment does not mean an easier hiring market. The unemployment rate fell because fewer job seekers are actively looking for work, not because hiring accelerated.
- Talent availability may feel tighter than the data suggests. Declining participation means fewer active candidates, even as overall job growth softens.
- Wage pressure is easing unevenly. Employers may see relief in some roles, but competition remains intense for specialized and technical talent.
- Regional and sector differences matter more than national averages. Hiring conditions vary widely by industry and province, requiring targeted workforce strategies.
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What Changed in January 2026?
After a relatively stable end to 2025, January marked a clear shift. Total employment fell by roughly 27,000 positions, driven by a decline in part-time roles, while full-time employment increased. This pattern points to more cautious and selective hiring as organizations entered the new year.
Despite the job losses, Canada’s unemployment rate fell to 6.5 percent. This decline was not the result of stronger hiring. Instead, fewer Canadians were actively looking for work, which reduced the size of the labour force and mechanically lowered the unemployment rate.
For employers, this distinction is critical. A falling unemployment rate driven by declining participation typically signals hesitation among job seekers rather than renewed confidence in hiring conditions or the broader economy.
Participation Is the Indicator Employers Should Watch Closely
Labour force participation declined in January, suggesting that some workers are stepping back from job searching altogether. This behaviour often reflects uncertainty about job prospects rather than satisfaction with available opportunities.
In practical terms, employers may still experience difficulty filling roles, particularly in specialized or technical positions where there are shallower talent pools, even as overall hiring slows.
Sector and Regional Shifts
Sector highlights
- Manufacturing recorded notable employment declines (27,500), continuing pressure on goods-producing and export-oriented industries.
- Education services and public administration recorded modest job losses in January, reflecting sector-specific and seasonal pressures.
- Employment gains were concentrated in business support services, information and cultural industries, utilities, and agriculture, though these increases were not enough to offset overall declines.
- Overall job losses were concentrated in the private sector, while public sector employment remained stable overall.
Together, these patterns reflect an economy that is uneven and fragmented rather than expanding broadly.
Regional highlights
- Ontario experienced employment declines in January especially in manufacturing.
- Alberta, Saskatchewan, and Newfoundland and Labrador reported gains, reflecting continued strength in energy-linked and resource-driven economies.
National averages continue to mask meaningful regional differences in hiring conditions.
What This Means for Employers
“A lower unemployment rate can look encouraging on the surface, but when participation is falling, it signals hesitation rather than confidence,” says Craig Brown, CEO of Agilus Work Solutions. “For employers, this is a moment to look beyond the headlines and focus on workforce resilience, succession planning, and the skills that will be hardest to replace if conditions tighten further.”
Key implications for employers include:
- Wage growth is slowing, easing pressure in some roles, but employers continue to compete aggressively for specialized and in-demand skills.
- A smaller active talent pool can make hiring feel more constrained even as overall job growth slows.
- Sector-specific and regional differences are becoming more pronounced, reinforcing the need for targeted workforce strategies rather than one-size-fits-all planning.
Labour Market Outlook
January’s data present a mixed but increasingly negative picture for employers, workers, and job seekers. Hiring momentum has softened, labour force participation has declined, and labour market conditions continue to diverge sharply by industry and region. While this does not yet point to a sharp contraction, it reinforces that economic pressure is building and that labour market strength is weakening beneath the headline numbers.
For 2026, employers should plan for continued variability rather than a clear single directional trend. Organizations that invest in internal mobility, succession planning, and targeted recruitment strategies will be better positioned to manage uncertainty as labour market conditions evolve.
Summary Metrics
| Metric | January 2026 | Direction |
| Unemployment rate | 6.5% | Down |
| Total employment | −27,000 | Down |
| Participation rate | Declined | Down |
| Full-time employment | Increased | Up |
| Part-time employment | Decreased | Down |
| Average hourly wage growth (Y/Y) | ~3.3% | Slowing |
About Agilus Work Solutions
Agilus Work Solutions is one of Canada’s largest recruitment and staffing firms, helping employers navigate changing labour markets with confidence. With deep expertise across engineering, technology, life sciences, professional, and light industrial talent, Agilus partners with organizations to build resilient workforces aligned to real business needs.
Our recruiters live and work in the communities they serve, combining local insight with national reach. From labour market intelligence and workforce planning to specialized recruitment, Agilus helps organizations adapt as hiring conditions evolve.
Planning your 2026 hiring strategy?
We are experts in specialized talent. Connect with an Agilus talent expert to discuss what today’s labour market signals mean for your workforce, your region, and your industry.
Frequently Asked Questions for Employers
Q1. Why did unemployment fall even though jobs were lost in January?
Because fewer people were actively looking for work. When labour force participation declines, the unemployment rate can fall even if employment decreases.
Q2. Does this mean Canada’s labour market is weakening?
The market is cooling rather than collapsing. Hiring has slowed, and pressure is building, but conditions vary widely by sector and region.
Q3. Which sectors are under the most pressure right now?
Manufacturing, education services, and parts of the public sector are experiencing the most notable employment declines.
Q4. Are wage pressures easing for employers?
Wage growth is slowing, which eases pressure in some roles, but competition remains intense for specialized and technical talent, where talent pools are shallow.
Q5. What should employers prioritize in 2026 workforce planning?
Critical skill retention, internal development, regional hiring strategies including employer branding, and succession planning should be top priorities.