Canada’s labour market deteriorated sharply in February. Employment fell by 83,900 (-0.4 per cent), bringing the two-month cumulative decline to 109,000 jobs. Year-over-year employment growth slowed to just 0.2 per cent, while the unemployment rate rose 20 basis points to 6.7 per cent, even as the labour force participation rate edged down to 64.9 per cent, providing a modest mechanical offset to the headline rate increase. Meanwhile, the working-age population was essentially flat, reflecting the impact of federal immigration caps.
February’s decline marked the largest single-month job loss since January 2022 and, excluding pandemic-era volatility, the weakest result outside the financial crisis since 2000. The deterioration was geographically broad-based: eight of ten provinces reported employment losses, compared with January when the decline was concentrated in Ontario. The sharpest provincial contractions occurred in Quebec (-1.2 per cent), Saskatchewan (-0.9 per cent), and British Columbia (-0.7 per cent), while Ontario was roughly flat. Statistics Canada also flagged a pronounced decline in youth employment, which fell by 46,900 (-1.7 percent).
The composition of the decline suggests a deterioration in job quality. Full-time employment contracted by 108,400, with a partial offset from workers shifting to part-time hours. Both the private sector (-0.5 per cent) and public sector (-0.4 per cent) contributed to the pullback. Within goods-producing industries, employment fell by 27,900 (-0.7 per cent), led by declines in construction (-11,800 or -0.7 per cent) and manufacturing (-9,200 or -0.5 per cent), the latter consistent with ongoing trade-related headwinds. Services-sector employment declined by 56,200 jobs in aggregate, with the largest losses in wholesale and retail trade (-17,900 or -0.6 per cent) and information, culture, and recreation (-12,000 or -1.4 per cent).
Provincially, the most pronounced increases in unemployment were recorded in Quebec (5.2 per cent to 5.9 per cent), Ontario (7.3 per cent to 7.6 per cent), and Saskatchewan (5.3 per cent to 5.6 per cent). Prince Edward Island was the only province to post a meaningful improvement, with its unemployment rate falling from 7.6 per cent to 7.2 per cent. Across the country, provincial unemployment rates now range from a low of 5.6 per cent in Saskatchewan to a high of 9.2 per cent in Newfoundland and Labrador.
Wage growth accelerated to 3.9 per cent year-over-year and has shown upward momentum in recent months. However, this likely reflects compositional effects, specifically the disproportionate loss of lower-wage positions, rather than underlying labour market strength, though labour supply dynamics may also be a contributing factor.
Implications for rates: This report marks a weak start to 2026, with total employment now back to its lowest level since September. At the margin, the data supports expectations for either a Bank of Canada rate cut or an extended hold. However, its influence on near-term policy decisions will likely be tempered by elevated geopolitical risks and ongoing volatility in global energy markets.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
When Canadians discuss housing affordability, the conversation typically centres on interest rates, land prices, and construction costs. Yet one of the most significant — and least visible — contributors is development charges (DCs): upfront municipal fees levied on every new residential unit before a single shovel breaks ground. As we have examined in previous analyses, including Reforming Ontario’s Development Charge (DC) Framework and Should We Replace Development Charges with Property Taxes?, DCs are quietly pushing homeownership out of reach for a growing number of Canadians, particularly first-time buyers.
Our latest Housing Affordability Watch explores how DCs affect supply, raise prices, and what fairer alternatives look like.
Read the full analysis: Development Charges and the Housing Affordability Crisis
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