By Robb M. Stewart
OTTAWA--Canadians resumed job hunting last month only to learn that finding work remains tough, sending the unemployment rate up sharply in the final month of 2025.
Employers in the country added a net 8,200 jobs in December, Statistics Canada said Friday.
That continued the hiring seen the past few months, though at a muted pace that failed to keep up with a strong rebound in the size of labor force and increased participation. The result was the jobless rate climbing to 6.8%, a large 0.3-percentage-point rise that rolled back half of the decline seen cumulatively the previous two months.
The labor survey caps a soft year for a labor market roiled by tariffs and uncertainty. Until September, there had been virtually no net growth in employment in Canada and December's result effectively revisits that trend.
The hiring for the month, though modest, was stronger than the 2,500 job losses economists were expecting and comes after the economy added almost 181,000 jobs over the prior three months. And the rise in the unemployment rate, while a tick higher than the 6.7% penciled in, was the first advance since August, when the rate hit the highest level outside the pandemic since 2016 at 7.1%.
"Today's data demonstrate that the sharp move lower in unemployment during the preceding month was partly flattered by a decline in labor force participation," said Andrew Grantham, senior economist at CIBC Capital Markets.
With the federal government tightening immigration the population rose by just under 10,000 last month, the slowest pace on record. Still the labor force expanded by 81,000 as the proportion of the working-age population employed or looking for a job increased 0.3 point to 65.4%.
There was a strong 50,200 rise in full-time employment numbers in December, though that was moderated by a 40,000 drop in part-time positions that took back some of the strength the last two months. What job gains there were focused mainly on the ranks of the self-employed, with little movement in numbers of private or public sector employees.
When calculated using U.S. Labor Department methodology, Canada's unemployment rate was 0.1 percentage points higher at 5.7%.
Adding to the dovish tone of the labor force survey, wage growth cooled for the month, though it continues to outpace annual consumer price inflation that sits just above the Bank of Canada's 2% target. Wages for permanent employees rose 3.7% on a year earlier, softer than the 4.0% advance the month before and the 3.8% growth economists expected.
Canada's economy has been dented by the Trump administration's threat and imposition of tariffs, and hiring plans have been soft even as layoff rates in 2025 held to historical levels. Before September's jump in hiring, the proportion of job seekers who found work from one month was 18.1% on average during the year, down from 21% in 2024 and 24% between 2017 and 2019 before the pandemic.
The Bank of Canada projects modest growth for the economy this year, in part as labor market softness weighs on household spending. Central bankers have signalled that after a string of interest rate cuts, the bar is high for any further moves.
The Canadian Federation of Independent Business's monthly barometer showed a recovery in optimism among the country's small businesses in December to a year-long high, though more than half of companies reported insufficient demand and staffing plans overall remained weak as more businesses plan to reduce full-time positions than hire.
Economists say it is clear that slack remains in Canada's labor market. Some expect layoffs in early 2026 as the economy struggles to grow amid ongoing trade uncertainty and weak domestic demand, which could push the underemployment rate back above 7%, while others continue to anticipate improvement. Markets were little changed following the data.
"Rather than signaling a setback, December's modest employment gain and rising unemployment rate reinforce our view that Canada's labor market recovery is under way, but will likely prove choppy, with slack absorbed only gradually over time," said Claire Fan, senior economist at Royal Bank of Canada.
Write to Robb M. Stewart robb.stewart@wsj.com
Corrections & Amplifications
This headline was corrected at 11:17 a.m. ET because it incorrectly described the statistic as employment rate in the headline. Canada's unemployment rate jumped to 6.8%.
(END) Dow Jones Newswires
01-09-26 1114ET
