Canada's labour market showed signs of strain in March, with employment figures unexpectedly contracting for the first time since January 2022, according to Statistics Canada's latest Labour Force Survey.

The economy shed 33,000 jobs, a 0.2 per cent decline, pushing the unemployment rate up slightly to 6.7%. The downturn, driven largely by a drop in full-time positions, signals a potential cooling of the previously robust labor market, raising concerns about the broader economic outlook.

“The wheels may be starting to come off the Canadian labour market,” which forecasters thought would add 10,000 jobs in March, rather than lose 33,000, Andrew Grantham, an economist at CIBC, wrote in a note to clients. “The concerning recent trend, combined with the likelihood of further weakness ahead as U.S. tariffs start to impact hiring decisions, leans towards further reductions in interest rates from the Bank of Canada.”

Grantham said he expects the central bank to take next week’s business and consumer surveys, as well as global risk assessments, into account before deciding on the timing of any cuts. Policy makers next meet on April 16. The chances of a cut increased to two-in-three, from 50-50 before the employment data was released.

The March job losses were concentrated in wholesale and retail trade, and information, culture, and recreation. Men aged 55 and over were particularly affected by the employment declines.

Ontario and Alberta saw the largest losses, while Saskatchewan bucked the trend with modest gains. The private sector also experienced a contraction, losing 48,000 positions.