It was a soft, though somewhat mixed, report for the Canadian labour market to start the year. Employment fell 24.8K in January, led by losses in Ontario. But the unemployment rate dipped from 6.8% to 6.5% as fewer people looked for work, and December jobs were revised up ever so slightly (+10.1K vs 8.2K previously).

It’s been a rollercoaster ride in the labour market. The autumn months saw a resurgence of job growth following a summer cooldown. Amid the trade war, talk of recession was replaced with talk of resiliency. But we have warned that Canada was likely overdue for a setback given that forward-looking surveys pointed to soft hiring intentions and the economy itself has slowed (Q4 GDP is tracking slightly negative). January’s report is a reminder of that.

A key theme for 2026 will be much slower population growth - this means, fewer jobs that need to be added each month to hold the jobless rate steady (all things equal).

Alberta’s labour market - The year of rebalancing

Alberta posted a solid gain of 20.3K, entirely due to full-time jobs. It was enough to pull down the unemployment rate from 6.7% to 6.4% - its lowest since February 2024. Alberta leads all provinces in year-over-year employment growth at 3.4% vs. 0.6% nationally.

Digging into the details, over half the monthly gain in January came from the goods-producing industries, led by construction and manufacturing. Finance, insurance and real estate led the charge for the service sector.

Over the last two years, the Alberta economy has churned out jobs, but struggled to keep pace with the people looking. The result: elevated unemployment. That theme has changed as of late, with unemployment off its post-pandemic peak of 8.2% in August 2025. That is, jobs have more than kept up with job seekers. This will be easier to do in 2026, as population growth slows considerably.

Does today’s report change our view of the Alberta labour market? It was a much stronger start than we were expecting and, on its own, it would be enough to upgrade our forecast. But it’s only one month. We expect these readings to be choppy given the tough geopolitical backdrop. Our December forecast for 6.5% average unemployment and 2.8% employment growth in 2026 looks reasonable for now, but we now see some upside to that forecast.

We are still looking for a more forceful rotation into goods-sector hiring, which tends to anchor broader gains in the province. After a year of flat growth, January’s jump in the goods sector is reassuring. However, the construction gains may be difficult to sustain given the expected cooldown in home building. Oil and gas employment dipped again, consistent with the recent pullback in oil prices, and with a flat profile for investment, we don’t expect much there.

Not enough for the Bank of Canada to cut

Despite the soft jobs report, it won’t be enough for the Bank of Canada to cut at the next meeting in our view. Core inflation is still sticky above target and the Bank is already at the low end of its neutral range. We maintain our forecast for the Bank of Canada to hold this year.

The trivia section will be in The Seven coming out later today.