The Canadian economy lost 200,000 jobs in January amid stricter public health rules put in place to slow the spread of the Omicron variant of COVID-19.
The decrease marked the largest drop since January 2021, when the economy shed 207,800 jobs, Statistics Canada said Friday.
The job losses also pushed the unemployment rate to 6.5 per cent in January compared with 6.0 per cent in December
As Omicron spread across the country, governments reintroduced capacity limits and closures for workplaces such as restaurants and gyms.
The bulk of the job losses were in Ontario and Quebec, which implemented some of the strictest measures of any province.
Food services and hotels were among the hardest hit, with young people and women most affected, Statistics Canada said.
"The increase in unemployment in January was entirely due to more people on temporary lay-off or scheduled to start a job in the near future, while the number of people looking for work was little changed," it said.
Absence due to illness rose to a record high in January, with one in 10 employees away from their post. The number of employees who worked less than half their usual hours climbed by 620,000 or two-thirds, the largest increase since March 2020.
However, Royal Bank economists Nathan Janzen and Claire Fan said they expect the impacts of Omicron to be short-lived and not extend beyond the first quarter of 2022.
Recent history may prove a guide. The wave of job losses in January 2021 was followed by a bigger rebound of 272,500 in February last year. The economy lost 198,800 jobs last April — followed by another decline in May — but bounced back with 214,600 gains in June.
"The Canadian labour market showed impressive ability to rebound after previous waves last year, and some of the prevailing conditions that helped the recovery, like elevated employer hiring appetite, remain," Brendon Bernard, a senior economist at job-posting site Indeed, said in an email.
"With rules around indoor dining relaxing in some provinces, some of the jobs lost are likely to return quickly."
Christopher Reynolds, The Canadian Press