Key Takeaways
- The unemployment rate in Canada rose to 6.8% in December, up from 6.5% in November, due to an increase in people looking for work.
- The economy added 8,200 jobs in December, exceeding economists’ expectations, with gains in full-time work and the healthcare and social assistance sector.
- Average hourly wages rose 3.4% year-over-year in December, cooling from 3.6% in November.
- The labour market faced headwinds from U.S. tariffs, but conditions improved for job seekers toward the end of the year.
- The Bank of Canada is expected to keep its benchmark interest rate on hold through 2026, with economists predicting no changes in the near future.
Introduction to the Labour Market
The latest labour market data from Statistics Canada shows that the unemployment rate rose to 6.8% in December, up from 6.5% in November. This increase was driven by a boost in the number of people looking for work, which is an encouraging sign for the economy. The agency reported that the economy added 8,200 jobs in December, topping economists’ expectations. This growth was concentrated in full-time work, with the healthcare and social assistance sector leading the way with 21,000 new positions added.
Job Gains and Losses
The job gains in December were not uniform across all industries, with some sectors experiencing losses. The professional, scientific and technical services sector shed 18,000 positions, while the accommodation and food services industry also faced losses. On the other hand, the construction industry and "other services" sector, which includes professions such as hairdressers and auto mechanics, saw increases in employment. The trade-sensitive manufacturing sector added 4,300 jobs in December, a positive sign for an industry that has faced challenges due to U.S. tariffs.
Wage Growth and Labour Market Trends
Average hourly wages rose 3.4% year-over-year in December, cooling from 3.6% in November. This slowdown in wage growth may be a sign that the labour market is moderating, but it is still a positive trend for workers. The labour market has faced headwinds from U.S. tariffs, but conditions improved for job seekers toward the end of the year. RBC assistant chief economist Nathan Janzen noted that the increase in people looking for work is an encouraging development, as it suggests that Canadians who were on the sidelines of the labour market now feel more optimistic about their ability to find work.
Youth Employment and Challenges
Youth employment remains a challenge, with young workers aged 15 to 24 accounting for 27,000 job losses in December. This erased some of the gains seen in November and October, and the youth jobless rate rose to 13.3%. This is still down from the 15-year high of 14.7% recorded in September, but it highlights the ongoing difficulties faced by young people in the labour market. Statistics Canada noted that youth faced tough job prospects in 2025, and it will be important to monitor this trend in the coming year.
Implications for Monetary Policy
The latest labour market data has implications for monetary policy, with the Bank of Canada set to make its first interest rate decision of the year at the end of January. Economists predict that the central bank will keep its benchmark interest rate on hold, as the labour market is expected to continue growing at a moderate pace. BMO chief economist Doug Porter noted that December’s job figures likely reflect the labour market’s reality better than the previous months of outsized job gains, and that the moderation in job growth is unlikely to move the Bank of Canada from the sidelines. TD Bank senior economist Andrew Hencic also argued that uncertainty in the economy and lingering inflation risks should keep the central bank from lowering its rate any further.
Conclusion and Outlook
In conclusion, the latest labour market data shows that the Canadian economy added jobs in December, but the unemployment rate rose due to an increase in people looking for work. The labour market faced headwinds from U.S. tariffs, but conditions improved for job seekers toward the end of the year. The Bank of Canada is expected to keep its benchmark interest rate on hold, and economists predict that the labour market will continue to grow at a moderate pace in 2026. As the economy continues to evolve, it will be important to monitor trends in the labour market and their implications for monetary policy.