Today’s latest figures from Statistics Canada come amid ongoing trade tensions and heightened uncertainty, setting the stage for the Bank of Canada’s expected 25 basis point rate cut next week.

Employment in Canada remained nearly unchanged in February, adding only 1,100 jobs, a far cry from the significant increases seen in the previous two months. Meanwhile, the unemployment rate held steady 6.6%.

The result came as a surprise to some economists, who noted that the large employment spikes in December (+91k) and January (+76k) ‘favoured another gain’ based on historical trends, according to Scotiabank’s Derek Holt.

RBC economists had predicted a moderate increase of 15,000 net new jobs.

The labour force participation rate, which tracks the proportion of Canadians 15 and up who are working or looking for work, fell 0.2% in February for the first time since September 2024.

In response to the data, the Canadian dollar slipped 0.4% to 0.697 before regaining some ground, while the Government of Canada 5-year bond yield slipped two basis points to 2.70% as of the time of writing.

Total hours worked also saw a notable dip, decreasing by 1.3%, the largest drop since April 2022. Statistics Canada attributed much of this decline to severe winter weather, which led to 429,000 workers losing hours between February 9 and 15.

“The job market couldn’t keep up its feverish pace over the last few months,” wrote James Orlando of TD Economics, adding that “deteriorating hiring sentiment given heighten policy/trade uncertainty may have also started to bleed into the data.”

BMO’s Douglas Porter echoed concerns about the impact of the ongoing trade dispute with the U.S., which he believes has begun to affect Canada’s job market. “Looking through the monthly wobbles, it’s reasonably clear that the job market had been turning the corner in recent months…until the trade war erupted,” he noted.

In terms of sector performance, wholesale and retail trade (+51,000) and finance, real estate, rental, and leasing (+16,000) saw gains, while there were notable losses in professional, scientific, and technical services (-16,000) and transportation and warehousing (-23,000).

25 bps rate cut anticipated next week as trade war concerns persist

As has been the case since last month, trade war anxieties remain in focus compared to labour data, Canadian economists note. 

Porter said while there was “a little drama” in today’s Canadian jobs data for a change, markets will soon refocus on the ongoing trade war concerns. 

TD’s Orlando emphasizes the importance of watching Canada’s labour market for ‘signs of weakness’ in the coming months, but notes that the job market “came into the current tariff crisis on solid footing, which is important given the significant headwinds the economy is facing.” 

Orlando is hopeful that the Bank of Canada will cut rates next week by 25 bps as markets are currently pricing in. 

In the U.S., the situation shifted this morning with 151,000 jobs added last month, although unemployment rose slightly to 4.1%.

TD Economics’ Thomas Feltmate notes that hiring activity has been positive over the last quarter, but is expected to soften due to layoffs by the Department of Government Efficiency (DOGE) and ongoing trade policy uncertainty. 

That said, Feltmate’s research points to three 25bps cuts by the Fed in 2025. 

“Financial markets have become increasingly concerned about slowing growth prospects in recent weeks, with Fed futures now fully pricing for three 25bps rate cuts by year-end,” he said. “However, the Fed is unlikely to be swayed by the recent market volatility, particularly amid a still healthy labour market and potential policy changes that could further add to still elevated inflationary pressures.”

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Last modified: March 7, 2025