Canada's labour market showed mixed signals to close out 2025, as the national unemployment rate ticked higher in December even as the economy added jobs. According to the latest data from Statistics Canada, the jobless rate rose to 6.8% last month, up from a revised 6.5% in November.
Job Growth Outpaced by Labour Force Expansion
The agency reported that the Canadian economy generated 8,200 new positions in December. However, this net job creation was not sufficient to absorb the growing number of people actively looking for work, leading to the increase in the unemployment rate. This follows a period of three consecutive months of job growth earlier in the fall.
The provincial picture was particularly telling. Job gains in Canada's two most populous provinces, Ontario and Quebec, failed to keep pace with the expansion of their labour forces. This dynamic was a primary driver behind the national rate moving higher, as both provinces saw their own unemployment rates increase.
Sectoral Shifts and Demographic Impacts
A deeper look at the December data reveals significant shifts beneath the headline numbers. Job creation was concentrated in full-time work, a positive sign for economic stability. The health care and social assistance sector led all industries, adding a robust 21,000 positions.
These gains, however, were partially erased by substantial losses elsewhere. The professional, scientific and technical services sector contracted sharply, shedding 18,000 jobs. The accommodation and food services industry also continued to face challenges, posting further losses in December.
There was a sliver of positive news for trade-exposed industries. The manufacturing sector, which is highly sensitive to international trade flows, added 4,300 jobs. This comes despite ongoing economic tensions, particularly with the United States.
The report highlighted a worrying trend for younger workers. Canadians aged 15 to 24 accounted for 27,000 job losses in December. This erased a significant portion of the employment gains this demographic had achieved in October and November, underscoring the volatility they often face in the labour market.
Implications for Monetary Policy and Economic Outlook
Economists were quick to analyze what the December figures mean for the Bank of Canada's path forward. Nathan Janzen, assistant chief economist at RBC, noted to The Canadian Press that while the U.S. trade war continues to cast a shadow, there are signs of stabilization in affected sectors.
"The labour market ended the year better than was feared earlier in the year when U.S. tariff threats and actual tariffs got implemented," Janzen stated.
The consensus among leading analysts is that the report supports a continued pause on interest rate changes. Doug Porter, chief economist at BMO, indicated in a client note that the data suggests the central bank will keep its benchmark interest rate on hold throughout 2026.
This view was echoed by Andrew Grantham of CIBC Capital Markets. He argued that with more people entering the job search, the elevated unemployment rate indicates there is still "plenty of room for non-inflationary growth" before the Bank of Canada would need to consider raising interest rates again.
The Bank of Canada held its key policy rate steady at 2.25% at its final meeting of 2025, a stance that December's employment data appears to reinforce as the country moves into the new year.
