February’s jobs report for Canada stands in sharp contrast to the previous three months and highlights the toll that tariff threats and uncertainty are taking on Canada’s economy.
The economy added a mere 1,000 jobs while the unemployment rate remained steady at 6.6 per cent. The lack of job gain with no adverse effect on the unemployment rate means that population growth has slowed.
The gain of 20,800 part-time jobs was offset by a loss of 19,700 full-time jobs. Similarly, the addition of 20,600 jobs in the services-producing sector was offset by a loss of 19,500 jobs in the goods-producing sector. This is unsurprising as the goods-producing sector stands to lose the most under tariffs.
Given the weak jobs report, expect the Bank of Canada to drop its interest rate by 25 basis points at the announcement next week. Already, over 60 per cent of Canadian exports to the U.S. are subject to 25 per cent tariffs as they currently are not covered under the Canada-United States-Mexico Agreement (CUSMA).
Demand for these goods will decrease, making it necessary for the central bank to cut rates to soften the blow.
Tariff threats and the outcome of trade negotiations will most likely continue to influence the job market. Expect demand for talent to fall if broad-based tariffs are implemented alongside a spree of other tariffs, including reciprocal tariffs in April.
Tariffs and the threat of tariffs are also shaping jobs by sector. In anticipation of tariffs, trade added the most jobs (51,000) as businesses pulled forward orders. At the same time, tariffs cooled demand in manufacturing as the sector lost 4,800 jobs.
The uncertainty means that manufacturers might wait and see on the outcome of tariff threats, and subsequent demand, before hiring more.
Weather also likely played a role as intense winter storms resulted in shorter hours worked in February by blocking roads and preventing people from getting to work.
Another strong sector was finance, insurance, real estate and leasing, which is highly interest-rate sensitive and less vulnerable to tariffs on merchandise goods as they lie firmly in the services sector.
