Canada’s labour market hit a major speed bump in February, losing 84,000 jobs and pushing the national unemployment rate up to 6.7%. This downturn represents one of the steepest monthly declines seen in years outside of the pandemic, signalling a cautious shift among employers as global trade tensions and market volatility begin to weigh on business confidence.
For SMB employers, these figures underscore a cooling period that requires a strategic approach to talent management. While the headline loss is stark, the data shows a complex picture of a market returning to a flatter trend after a period of unexpected strength at the end of last year. Understanding where these losses are concentrated is vital for business owners looking to navigate the current economic climate without losing their competitive edge.
Private sector and full-time roles lead the decline
The bulk of the February job losses came from the areas that typically drive economic growth: the private sector and full-time positions. Private sector employment dropped by 73,000, which marks the second consecutive month of decline for this group. Simultaneously, full-time roles fell by 108,000, effectively erasing the progress made during the final months of 2025.
This shift suggests that many companies are moving into a “wait and see” mode rather than pursuing aggressive expansion. With full-time work taking the biggest hit, it’s clear that the demand for permanent labour is softening as businesses tighten their belts. It’s a moment for SMBs to focus on productivity and ensuring their current teams are supported, rather than overextending in an unstable environment.
“The drop in full-time, private sector roles is a signal that many businesses are hitting the pause button on their growth plans,” says KJ Lee, CEO at Employment Hero Canada. “While the numbers are a sobering reminder of the current economic headwinds, it’s also an opportunity for SMB employers to refine their internal processes and focus on retaining the high-value talent they already have.”
The downturn wasn’t isolated to a single corner of the economy; it was felt across both goods and services industries. Wholesale and retail trade saw a significant dip of 18,000 jobs, while the construction sector shed 12,000 positions. Even manufacturing, a traditional pillar of the Canadian economy, lost 9,200 jobs during the month.
Geographically, the impact was most pronounced in Quebec and Western Canada. Quebec reported a loss of 57,000 jobs, a –1.2% MoM change, while British Columbia saw a decline of 20,000 positions, representing a –0.7% MoM shift. Saskatchewan and Manitoba also saw their employment numbers dip, down –0.9% MoM and –0.5% MoM, respectively. Interestingly, Newfoundland and Labrador stood out as a rare pocket of growth, adding 2,100 jobs to its local economy.
Demographic pressure and the wage growth paradox
The February data reveal that younger workers and core-aged men are bearing the brunt of the current market softness. Youth employment for those aged 15 to 24 fell by 47,000, pushing the youth unemployment rate up to 14.1%. For men aged 25 to 54, employment decreased by 41,000, a –0.6% MoM change.
Despite the drop in overall employment, wage growth remains surprisingly resilient. Average hourly wages rose 3.9% YoY to reach $37.56. This creates a challenging environment for SMBs: they’re facing higher labour costs at the same time that demand for their products and services may be cooling. Balancing these rising costs with a leaner workforce will be the primary hurdle for managers in the coming months.
“Employers are caught in a bit of a pincer movement right now, with rising wages on one side and a cooling labour market on the other,” says Lee. “The key for SMBs is to use data to make informed decisions. Don’t let the headlines cause panic; instead, use this time to look at where your business can be more efficient and how you can offer better value to your employees beyond just the paycheque.”
While the February report is undoubtedly weak, it’s important to keep the broader perspective in mind. The national unemployment rate of 6.7% is still lower than the peaks seen in late 2025, and the current dip follows a period of growth that may have been unsustainable. The Canadian labour market has shown a remarkable ability to bounce back, and for SMBs, the focus should remain on agility.
The coming months will likely see more volatility as the Bank of Canada weighs these job losses against inflation data. For the hero of the Canadian economy, the SMB owner, the mission hasn’t changed. By staying informed, managing costs sensibly and focusing on the core strengths of their people, businesses can weather this temporary cooling and prepare for the next cycle of growth.
