Canada’s employment growth abruptly slowed in December 2025, adding just 8,200 new positions after a strong hiring run in the previous quarter. The unemployment rate climbed to 6.8% from 6.5% as more Canadians entered the labour force, according to Statistics Canada’s report released on January 9. These employment figures shaped modest market reactions and reinforce the Bank of Canada’s current monetary stance.

December Employment Data Shows Slowing Growth Amid Rising Unemployment

Statistics Canada noted the December job creation of 8,200 significantly lagged the 181,000 jobs added between September and November. Analysts polled by Reuters had expected a decline of 5,000 jobs and an unemployment rate of 6.6%, making the actual figures a surprise. The total number unemployed rose by 72,900, or 4.9%, to approximately 1.55 million Canadians out of work.

Full-time employment expanded by 50,200 roles, while part-time employment contracted by 42,000. Sector-specific shifts included a 20,800 increase in health care and social assistance jobs and a 18,100 drop in professional, scientific, and technical services — the first decline in this sector since August. Youth employment, for individuals aged 15 to 24, reversed earlier gains from October and November, dipping by 1.0%, likely highlighting ongoing economic uncertainties affecting younger workers.

The Canadian dollar briefly slipped to C$1.3880 against the U.S. dollar (72.05 U.S. cents) following the release, from C$1.3873 (72.08 cents) previously.

Wage Growth and Monetary Policy Implications

Average hourly wages for permanent employees rose 3.7% year-over-year in December, easing slightly from 4.0% in November. This wage measure remains crucial for the Bank of Canada’s inflation outlook. The central bank held its key policy rate steady at 2.25% on December 10, viewing this as appropriate to maintain inflation near the 2% target. Money markets currently price in stable rates throughout 2026.

Andrew Grantham, senior economist at CIBC Capital Markets, commented, “With more people once again looking for work, today’s unemployment rate suggests that plenty of slack remains in the labor market.” Royce Mendes, head of macro strategy at Desjardins, added that while hiring slowed and unemployment rose, “the survey wasn’t weak enough to alter expectations for the Bank of Canada.”

Canada’s labour market had endured muted job growth through most of 2025 due to U.S. tariff uncertainties and trade tensions, with the surge in the fall partially offsetting those effects. December’s data indicate a labour market in transition, balancing higher participation with moderating job gains.

Employment: Market Outlook

The pause in Canada’s employment growth in December, accompanied by a rise in unemployment and steady wage inflation, suggests residual capacity in the job market. Investors and policymakers are likely to interpret the data as consistent with the Bank of Canada’s decision to hold interest rates at 2.25% for the foreseeable future. Ongoing employment trends will continue to be a key factor in shaping monetary policy and market expectations throughout 2026.