Canadian businesses appeared to be on a hiring spree even as a tariff war loomed large at the start of the year.

Employment rose by 76,000 in January, bringing the jobless rate down 0.1 percentage point to 6.6%, Statistics Canada reported Friday. Economists in a Bloomberg survey were expecting a smaller increase of 25,000 jobs with the unemployment rate rising to 6.8%.

The Canadian economy has been adding above-average numbers of jobs since November. Over the past three months, employment gains totaled 211,000 positions, with increases in both full-time and part-time work. That marks the largest gain over a three-month period since early 2023.

But the apparent jobs boom may not prevent the Bank of Canada from cutting interest rates further this year. The recent wave of hiring likely won’t be enough to placate concerns that the potential Canada-US trade war could plunge the economy into a recession. Still, traders in overnight swaps eased expectations for a cut at the March 12 meeting to about 55% from close to 80% previously.

The data were released at the same time as US nonfarm payrolls, which increased by 143,000 in January as the unemployment rate was 4%. The loonie reversed the day’s loss against the US dollar, trading at C$1.4288 as of 10:20 a.m. in Ottawa. Canada’s two-year yield rose some nine basis points to the session’s high of 2.67%, with Canadian debt underperforming US and developed markets.

Policymakers have slowed down the pace of rate cuts and signaled that they’re not certain about the future path of easing due to the uncertainties around President Donald Trump’s plans. Economists expect joblessness to rise during a tariff battle, which is now paused until next month. A few Canadian companies have already announced job cuts in recent days, citing tariff threats.

Employment increases in January were led by manufacturing, a sector that has the largest number of jobs dependent on US demand for Canadian exports and accounts for 8.9% of Canada’s total employment. An estimated 641,000 jobs in the sector, or nearly 40%, depend on the ability to export goods to the US.

“Manufacturing had a powerful 33,100 job gain, one of the largest moves on record aside from the pandemic distortions,” Douglas Porter, chief economist at Bank of Montreal, pointed out in a report to investors.

“It’s safe to speculate that factories geared up massively ahead of potential US tariffs, a trend which was quite apparent even in the US trade data as far back as December.”

Royce Mendes, managing director of rates and macro strategy at Desjardins Securities, also hypothesized that the manufacturing gain could be tied to US buyers stockpiling inventories ahead of tariffs, though it’s difficult to confirm.

“With inflation holding steady around the 2% target and wage growth cooling, the good news is that central bankers have some flexibility to respond if a shock hits the economy,” he told investors.

Professional services, construction and accommodation and food services also added jobs in January.

The data are clearly very positive, but the unemployment rate is still only just back to where it stood in October 2024, consistent with a labor market with plenty of slack, argued Andrew Grantham, economist at Canadian Imperial Bank of Commerce.

“We continue to think that even lower interest rates will be needed for the economy to fully absorb that slack, particularly given heightened trade uncertainty which could impact hiring decisions ahead,” he said in a note.

Benjamin Reitzes, rates and macro strategist at Bank of Montreal, sees growing evidence the central bank should hold rates next month. “Unless we get tariffs, or there’s some glaring sign that the threat of tariffs is hammering growth, or the data fall off a cliff in the next month, the case for a Bank of Canada pause in March is building,” he said.

The drop in the unemployment rate in January 2025 was the second consecutive monthly decline from a recent peak of 6.9% in November 2024. The total number of unemployed people was little changed at 1.5 million. Among those who were jobless in December, 65.4% remained unemployed in January, compared with a 61.7% share a year ago. That suggests Canadians are facing more difficulties in finding jobs despite recent employment growth.

The employment rate — the proportion of the working-age population that’s employed — rose 0.1 percentage points to 61.1% in January. That’s the third straight monthly increase, a stark difference from a period between April 2023 to October 2024 when the employment rate dropped 1.7 percentage points as population growth outpaced job gains.

Regionally, employment increased in Ontario, British Columbia and New Brunswick. It was little changed in other provinces.

Yearly wage growth for permanent employees decelerated to 3.7%, versus economist expectations of 3.8% and down from an upwardly revised 3.8% in December.

Total hours worked rose 0.9% last month, also starting the year on a strong footing.

(With assistance from Erik Hertzberg and Carter Johnson.)