Canada Lost 84,000 Jobs in February — The Tariff Chill Is Now a Labour Market Reality

Canada's labour market took its sharpest hit in three years last month. Employment fell by 84,000 positions in February 2026 — the largest single-month decline since January 2022 — pushing the unemployment rate up to 6.7% and raising serious questions about the direction of the Canadian economy heading into spring.

Combined with January's loss of 25,000 jobs, Canada has now shed 109,000 positions in the first two months of the year. That's not a blip. Two consecutive months of losses at this scale is the kind of sustained deterioration that changes how employers, lenders, and policymakers think about the near-term outlook.

Where the Losses Hit Hardest

The damage in February was broad but concentrated in a few key areas. Full-time employment bore the brunt — dropping 108,000 positions in a single month. The private sector shed 73,000 jobs. Manufacturing employment plunged by 28,000, a signal that trade-exposed industries are translating tariff uncertainty into actual headcount cuts, not just boardroom anxiety. Combined with construction, those two sectors alone account for over 21,000 losses. Wholesale and retail trade fell by another 18,000.

Youth workers were disproportionately affected. Employment among Canadians under 25 dropped by 47,000 — a 1.7% decline — pushing youth unemployment to 14.1%, the worst reading since September 2025. Core-aged men (typically ages 25–54) lost 41,000 positions, a 0.6% decline that points to contracting demand for experienced full-time workers, not just entry-level churn.

Wages Are Still Rising — But Don't Read Too Much Into It

One number that looks out of place: average hourly wages grew 3.9% year-over-year, reaching $37.56 per hour. That sounds like a tight labour market — but economists caution against taking it at face value. When lower-wage jobs are cut in large numbers, they fall out of the calculation, mechanically pulling the average upward. This is called a composition effect, and it's likely a significant driver here. In plain terms: wages aren't rising because employers are competing for workers — they're rising on paper because the workers who lost jobs were earning less than average.

TD Economics Is Forecasting a Prolonged Slowdown

TD Economics now expects annual job growth to decelerate sharply to between 75,000 and 100,000 positions in both 2026 and 2027 — down from an average of roughly 300,000 per year in 2025. The drivers are interrelated: soft consumer and business demand, and a shrinking labour force growth rate tied to tighter federal immigration targets. That's a structural shift, not a temporary correction. For business owners planning staffing or capacity investments over a multi-year horizon, this is a materially different operating environment than the one that existed 12 months ago.

The Tariff Connection

The concentration of losses in manufacturing and trade-adjacent sectors is not coincidental. Canada has been navigating an increasingly fraught trade relationship with the United States, and uncertainty around tariffs has a well-documented effect on capital allocation and hiring decisions. When businesses don't know what imported inputs will cost — or whether export markets will remain accessible — they delay investment and reduce headcount. February's data suggests that process is well underway.

What This Means for Your Business

If you've been struggling to hire or facing wage pressure over the past two years, conditions are shifting in your favour on the recruitment side. A rising unemployment rate and slowing labour force growth means more candidates, less competition, and reduced pressure to offer premium wages — particularly for entry-level and part-time roles. But the other side of that equation matters just as much: 109,000 fewer employed Canadians in two months means fewer people with paycheques to spend. If your business depends on discretionary consumer spending — retail, hospitality, services — expect softer demand heading into Q2 and plan inventory and staffing accordingly.

This is also a moment to revisit your financing assumptions. Lenders track labour market data, and a deteriorating employment picture can tighten credit conditions — even for businesses that are individually healthy. If you're planning to apply for a line of credit, equipment financing, or a BDC loan in the next six months, getting that process started sooner rather than later is a reasonable precaution. Similarly, if you're in a trade-exposed sector — manufacturing, wholesale, construction — it's worth stress-testing your cost structure against a scenario where conditions don't improve until late 2027.