Canadian job gains plummeted to just 1,100 in February, significantly undershooting the FactSet forecast of 20,000, as the impact of US tariffs percolates into Canada’s labor market. This contrasts starkly with the 76,000 jobs added in January, following a burst of 91,000 gains in December 2024.
The latest Statistics Canada report also shows the unemployment rate held steady at 6.6%, though it edged slightly lower from 6.7% in December and 6.9% in November 2024.
With uncertainty deepening over punitive tariffs on Canadian exports and the risk of retaliatory measures from Canada, analysts warn that job market conditions could deteriorate further if US levies aren’t eased or waived.
February’s gains were led by wholesale and retail employment but dragged down by steep declines in manufacturing and transportation and wholesaling—sectors highly exposed to tariff uncertainty.
Economists say the weak employment data pressures the Bank of Canada to continue cutting rates to spur growth. The central bank has cut at its last six consecutive meetings, bringing the policy rate down from its peak of 5% in June last year to 3%.
Below are highlights from analyst commentary on the February employment report, sourced from notes to clients.
Andrew Grantham, senior economist at CIBC Economics
“Hiring stalled during February, in what could be the first sign that tariff uncertainty is impacting the Canadian economy. The 1,000 gain was below the 20,000 expected by the consensus, and the unemployment rate only held steady at 6.6% due to a drop in labor force participation.
“Whether or not February’s stall in hiring is the first crack caused by tariff uncertainty, or simply the product of data volatility, it is likely that further weakness will be seen in the months ahead due to those ongoing trade tensions. While the Bank of Canada can’t solve the tariff issue with lower interest rates, it can help the economy transition towards other growth drivers. As a result, we continue to forecast a 25-basis-point cut next week, and further reductions to follow should tariff and economic uncertainty persist.”
James Orlando, director and senior economist at TD Bank
“The job market couldn’t keep up its feverish pace over the last few months. Winter storms were likely the culprit, but deteriorating hiring sentiment given heightened policy/trade uncertainty may have also started to bleed into the data. One month doesn’t make a trend, but Canadians should be closely watching the labor market for signs of weakness in the months ahead. Luckily, the Canadian labor market came into the current tariff crisis on solid footing, which is important given the significant headwinds the economy is facing.
“The Bank of Canada is set to meet next week, and markets are solidifying around a 25-basis-point cut. We have been arguing that it is prudent for the central bank to keep cutting as insurance against the downside risks brought on by tariffs. Our scenario analysis embeds significant risk of recession should President Trump keep holding tariffs over our heads. And even if delays keep happening, the uncertainty will weigh on business and consumer confidence, diminishing our previously rosy outlook for the economy.”
Stephen Brown, deputy chief North America economist at Capital Economics
“The essentially unchanged level of employment in February was probably mostly due to the unseasonably severe winter weather during the survey reference week rather than the threat of US tariffs. Nonetheless, the imposition of tariffs this week – even if there are exemptions – represents a downside risk to the labor market over the rest of the year.
“While [the factor of weather-related declines] leaves scope for hiring to strengthen in some sectors in March, the 4,800 decline in manufacturing employment could be a sign of what is to come for that sector amid the imposition of US tariffs.
“We previously expected much slower immigration and labor force growth to contribute to a decline in the unemployment rate this year but, with GDP growth and hiring now likely to be weaker than we previously assumed, our new forecast is that the unemployment rate will average between 6.6% and 6.8% throughout 2025. That weaker outlook will keep the Bank of Canada on track with another interest rate cut next week.”
Douglas Porter, chief economist at BMO Economics
“For a change, there’s little drama in today’s Canadian jobs data, and the markets will now quickly turn back to the original trade war programming. Overall, the figures are a bit weaker than expected—perhaps weather affected—but it’s notable that the jobless rate still held steady (after hitting 6.9% in November) and wages nudged up.
“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.”
Charles St-Arnaud, chief economist at Alberta Central
“Employment increased by a meager 1.1k in February, much weaker than expected. Despite the weak job gain, the unemployment rate remained 6.6%. It is important to note that the labor market underperformance comes after adding 210k jobs between November and January and that job gains have averaged 56k per month over the past 3 months.
“Overall, the weakness in February seems to be a return to normal. It will be interesting to see in next month’s report what impact the extreme uncertainty caused by the US tariffs will have on the labor market. With that, it is important to note that the amount of slack remains substantial, with the unemployment rate close to 7% and the participation rate and employment rate close to their lowest level since the late 1990s.
“Today’s release solidifies our view that the Bank of Canada will cut at next week’s meeting. Even with delayed tariffs, the extreme uncertainty seen in recent months is having a negative impact on the economy. As a result, we think a 25-basis-point cut would be appropriate and that more rate cuts should be expected this year.”
Tiago Figueiredo, macro strategist at Desjardins Capital Markets
“As businesses awaited news on tariffs, hiring in the Canadian economy stalled in February. Given that we were already seeing a slowdown in hiring before they were implemented, that suggests some of that strength that we had seen earlier in the year might have been fleeting, particularly given the reality of the damage that could come from an aggressive trade policy.
“Today’s job report opens the door for the Bank of Canada to cut interest rates next week. The slowdown in hiring even before tariffs were implemented gives the Bank of Canada an easy pass to cut interest rates another 25 basis points next week. Markets are pricing almost 90% odds that the central bank eases again.”
Tu Nguyen, economist at RSM Canada
“February’s job report stands in sharp contrast to the previous three months and highlights the toll tariff threats are taking on Canada’s economy. Tariff threats and the outcome of trade negotiations will likely continue to influence the job market in the months ahead. Expect demand for talent to fall if broad-based tariffs are implemented alongside a spree of other tariffs, including reciprocal tariffs in April.
“The Bank of Canada is expected to drop its interest rate by 25 basis points at the announcement next week. Already, over 60% of Canadian exports to the US are subject to 25% tariffs, as they currently are not covered under CUSMA.”
Nathan Janzen, assistant chief economist at Royal Bank of Canada
“The February labor market data was broadly in line with expectations—there are early signs that the intensification of uncertainty from US tariff threats, and pull back in measures of business confidence, had an impact on hiring on the more trade-sensitive goods producing side of the economy, with offsetting growth in more domestically focused services jobs.
“On its own, the improvement in Canadian economic data (upside surprise in Q4 GDP growth, unemployment rate still below its peak late last year, and upside inflation surprises in recent months) would probably be enough to warrant a pause in the Bank of Canada’s rate cutting cycle next week. But those positive developments are being overshadowed by escalating U.S. trade threats. The reported one-month reprieve from tariffs for USMCA compliant trade will help, but more trade uncertainty is in the pipeline including steel and aluminum tariffs set to kick in next week and ‘reciprocal’ tariff announcements to follow in April. We expect next week’s interest rate decision could still be impacted by news flow into early next week and will be a close call.”
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