Canada is losing jobs, but don’t worry—it needs less of them. That was the general takeaway from Statistics Canada (StatCan) this morning. Despite the agency reporting fewer jobs in January, the headline unemployment rate fell as fewer job seekers were in the market. Before bragging about how great the economy is, it’s worth understanding the reduced jobless rate only exists in models—not in the real world. The agency’s unadjusted data actually reveals the unemployment rate is rising, especially for young adults.
Canada Lost 25k Jobs, Unemployment Rate Falls As Job Seekers Drop
Canadian employment eroded last month. Employment fell 0.1% (-25k jobs) to 21.12 million in January, though it didn’t add to unemployment—at least in the headline data. The unemployment rate fell 0.3 points to 6.5% last month, a full 0.6 points lower than recent highs last summer, and the lowest rate since 2024 as “fewer people searched for work.” Um, yeah—about that.
Falling unemployment due to an increase in jobs is very different from fewer people searching for work. Fewer job seekers means workers are exiting the workforce faster than they’re being replaced or the unemployed are giving up on searching for work.
The latter doesn’t necessarily mean, the worker has actually given up looking for work, but instead doesn’t fit the definition. Workers need to be ready, willing, and able to be considered statistically unemployed. That means they need to be actively searching for work, and can’t have engagements that make them unavailable during the survey’s “reference work week.” This means full-time students are often not included in this demographic—a point we’ll circle back to.
In Seasonal Adjustments, No One Can Hear You Scream
Unadjusted data tells a slightly different story, showing a loss of 261.3k jobs in January. The unemployment rate climbed 0.5 points in response, hitting a 5-month high of 6.7%. This data also throws a kink in most of the takes from economists this morning.
The most common assumption is throttled immigration, primarily international students, helped the data. There were fewer jobs, but less people needed one with the reduced population. This group largely falls into the categories of young adults (20-24 years old) and prime-aged workers (25-54 years old)—let’s see what the data shows.
Young Adults (20-24 y/o): Headline Stability, Unadjusted Slump
The population for this group only fell by a minor 6.2k people, much bigger than the data gap.
Seasonally adjusted: Employment lost 26.6k jobs, leaving the unemployment rate unchanged at 9.3% in January.
Unadjusted: Employment lost 35.1k jobs, with the unemployment rate rising 2.2 points to 10.7%.
The headline unemployed population is also 18.9k smaller than the 212.1k unadjusted job seekers in this demographic.
Prime Aged Workers (25-54 y/o) Face A Not-So-Prime Job Market
How much seasonal adjustments boosts prime-age employment figures, shown as a percentage for January.
Source: StatCan; Better Dwelling.
This demographic, despite being much larger, made a much smaller population contraction. It fell by just 3.3k people, a rounding error on most days.
Seasonally adjusted: Employment lost 24.4k jobs in January while the unemployment rate climbed 0.5 point to a healthy 5.5%.
Unadjusted: Employment lost 136.6k jobs, with its unemployment rate climbing 0.3 points to 5.9% in January.
Job losses were 5.6x larger than the headline data. Even more surprising is that employment reached 14.0 million in January. That means 115.6k prime aged workers only had a job on paper.
Students May Be Looking For Jobs, But Rarely “Unemployed”
Throttling immigration likely improved employment prospects, but statistically it’s another story. Recall the part where jobseekers need to be ready, willing, and able in order to be considered unemployed? Full-time students often aren’t considered ready, as they typically aren’t available for the labour force survey (LFS) work week. This means even if they’re looking for a job, most can’t contribute to unemployment directly. However, if they find a job—they’re considered employed. Adorable model we’ve got there.
That said, the throttled immigration provides indirect job relief for young adults. Workers with limited experience face a significant amount of competition for work. As a result, reduced competition is likely to help job seekers—especially post-graduation.
Seasonal Adjustments: Smooth Lines For Smooth Brains
Seasonal adjustments are meant to filter the noise caused by repeatable, annual impacts—which no longer make sense in a modern economy. They make less sense as society’s infrastructure improves, and more people go to work during the winter. They’ve made even less sense over the past 20 years, as non-seasonal distortions such as shocks to trade, geopolitical events, and recession destroy purchasing habits more than weather.
Considering Canada is facing trade shocks, geopolitical tensions, and approaching recession—the data won’t be all that helpful in trying to decipher what’s happening.
This is a well known quirk that became apparent post-Great Recession. It’s not until years later that statisticians can actually separate which part of the impact was seasonal and which was a result of those events. A long-term tool designed to smooth a long-term trend never made sense for month-over-month comparison, but it make even less sense now. Ultimately, people need to decide what they’re looking for: the ability to sound smart, or understand the pressures the country faces.
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