As Oil Prices Cloud the Outlook, Canada’s Employers Grow Cautious on Hiring

The Bank of Canada’s latest Business Outlook Survey, released Monday, tells a story that will feel familiar to anyone who has spent the past few years trying to read Canada’s economy through a fog of geopolitical shocks: just as sentiment seemed to be firming, a new external jolt arrived to complicate the picture. This time, it is the war in the Middle East, and the energy price spike that came with it, that has businesses pulling back (modestly, but unmistakably) from three straight quarters of improving confidence.

For the staffing and recruitment industry, the details buried in the survey matter more than the headline. And those details point to a labour market that is cooling in most of the country even as one region (the oil-producing Prairies) heats back up.

The headline: sentiment softens, but not sharply

The Bank’s overall Business Outlook Survey indicator slipped to -0.39 in the second quarter, down slightly from -0.35 in the first quarter, after three consecutive quarters of improvement. The share of firms planning or budgeting for a recession over the next 12 months jumped to 17 percent, nearly double the 9 percent recorded last quarter, though still well below the levels seen throughout 2025.

The Bank was careful to note the timing of its survey: interviews were conducted between May 1 and 21, before an interim agreement between the United States and Iran eased tensions in mid-June. That means the survey likely captures the peak of the anxiety rather than the current state of it, and several bank economists who reviewed the data suggested sentiment should recover through the second half of the year as oil prices retrace some of their gains.

Still, for staffing firms building forecasts for Q3 and Q4, the message is one of a temporary but real dampening of business confidence, layered on top of an economy still adjusting to U.S. tariff policy and the ongoing CUSMA review.

The employment signal: fewer firms planning to add staff

This is the line staffing executives should read most closely: the Bank’s survey found that employment intentions weakened in the second quarter, with softer business outlooks weighing on hiring plans; a pattern the Bank said was especially pronounced outside the Prairies. Most businesses now say they plan to maintain or decrease current staffing levels rather than expand headcount, and firms continue to prioritize investment spending on equipment and technology, including AI integration, over adding people.

That said, the news wasn’t uniformly soft. The Bank’s labour market index, drawn from its companion Canadian Survey of Consumer Expectations, actually ticked up slightly from low levels in the first quarter, driven by a decline in workers’ perceived risk of losing their jobs, particularly in sectors most exposed to U.S. tariffs. In other words: employers are hesitant to hire, but workers already in place feel somewhat more secure than they did a few months ago. That combination, cautious net hiring alongside lower attrition risk, tends to produce a tighter, slower-moving job market, one where employers lean more heavily on contingent and temporary labour to manage workload spikes rather than committing to permanent headcount.

A tale of two Canadas: the Prairies diverge from the rest

Perhaps the most important nuance for staffing firms with a national footprint is the regional split. In the Prairies, businesses reported stronger outlooks for sales, investment, and hiring than in the previous quarter, driven almost entirely by firms in or linked to the oil sector, where higher crude prices have supported capital spending and staffing plans. Oil and gas producers have revised their capital spending and production plans upward, citing expectations that elevated prices will persist.

Outside the Prairies, the picture is closer to the national average or softer: weaker sales outlooks, more caution on hiring, and outlooks for consumer-facing businesses under particular pressure as higher gasoline prices squeeze discretionary spending on travel, dining, and big-ticket purchases.
For staffing firms, this points to a bifurcated near-term strategy: continued (even accelerating) demand for skilled trades, engineering, and industrial staffing in Alberta and Saskatchewan, against a backdrop of flatter or declining demand in consumer-facing, retail-adjacent, and discretionary-spending-linked roles in Ontario, Quebec, and Atlantic Canada.