Factories Are Still Hiring. Although the PMI Survey Just Closed Before the Tariffs Hit.
Economic Journal
August's manufacturing PMI recorded the sector's strongest job creation in nearly two years. But the responses were collected before Washington's new 50 per cent tariffs took effect.
Canada's factory sector cooled slightly in August without losing its footing. The S&P Global Canada Manufacturing Purchasing Managers' Index slipped to 53.0 from 53.5 in July, and it has now held above the 50.0 line separating expansion from contraction every month since April. July's reading had marked the sector's fastest expansion in more than four years, so a half-point retreat looks less like a turning point than a pause at altitude.
For staffing firms, the headline matters less than what sits underneath it. The survey's employment index rose to 52.0, its highest level since October 2024. Manufacturers are not simply running existing crews harder. They are adding people.
The hiring signal is real
Statistics Canada's Labour Force Survey, released three days after the PMI, corroborates the story. Manufacturing added 22,000 jobs in August, a 1.2 per cent increase and the only statistically significant gain of any industry in a month when total employment fell by 42,000. Roughly 14,000 of those manufacturing jobs were in Ontario.
The context tempers the celebration. Year over year, manufacturing employment was little changed, because the August gain essentially offset losses earlier in 2026. The sector is recovering ground rather than breaking new ground. Still, a manufacturing base that cut staff for eight consecutive months in 2025 under the first waves of U.S. tariffs is now hiring at the fastest pace the PMI has recorded in almost two years.
A domestic engine, a shrinking export market
The composition of demand explains much of the resilience. Output and new orders both rose for a fifth straight month, with production growing at its best rate since April as the output index edged up to 52.8. But the growth came predominantly from domestic customers. New export orders fell for a third consecutive month.
That split is the defining feature of Canadian manufacturing in 2026: a sector reorienting toward the home market as its largest foreign customer becomes less reliable. It also shows up on the plant floor. Manufacturers stepped up purchasing and modestly expanded input inventories, partly as precautionary buying against higher prices and possible shortages.
August's manufacturing PMI recorded the sector's strongest job creation in nearly two years. But the responses were collected before Washington's new 50 per cent tariffs took effect.
Canada's factory sector cooled slightly in August without losing its footing. The S&P Global Canada Manufacturing Purchasing Managers' Index slipped to 53.0 from 53.5 in July, and it has now held above the 50.0 line separating expansion from contraction every month since April. July's reading had marked the sector's fastest expansion in more than four years, so a half-point retreat looks less like a turning point than a pause at altitude.
For staffing firms, the headline matters less than what sits underneath it. The survey's employment index rose to 52.0, its highest level since October 2024. Manufacturers are not simply running existing crews harder. They are adding people.
The hiring signal is real
Statistics Canada's Labour Force Survey, released three days after the PMI, corroborates the story. Manufacturing added 22,000 jobs in August, a 1.2 per cent increase and the only statistically significant gain of any industry in a month when total employment fell by 42,000. Roughly 14,000 of those manufacturing jobs were in Ontario.
The context tempers the celebration. Year over year, manufacturing employment was little changed, because the August gain essentially offset losses earlier in 2026. The sector is recovering ground rather than breaking new ground. Still, a manufacturing base that cut staff for eight consecutive months in 2025 under the first waves of U.S. tariffs is now hiring at the fastest pace the PMI has recorded in almost two years.
A domestic engine, a shrinking export market
The composition of demand explains much of the resilience. Output and new orders both rose for a fifth straight month, with production growing at its best rate since April as the output index edged up to 52.8. But the growth came predominantly from domestic customers. New export orders fell for a third consecutive month.
That split is the defining feature of Canadian manufacturing in 2026: a sector reorienting toward the home market as its largest foreign customer becomes less reliable. It also shows up on the plant floor. Manufacturers stepped up purchasing and modestly expanded input inventories, partly as precautionary buying against higher prices and possible shortages.
Supplier delivery times lengthened considerably, which S&P Global attributed to tariffs and to disruption of shipping routes caused by the U.S.-Israeli war with Iran. Input cost inflation eased somewhat but remained elevated, and output price inflation moderated from July.
Confidence climbed regardless. The future output index rose to 58.7, the most optimistic reading since December 2024.
The timing problem
One caveat should frame every reading of this report: the survey was conducted before trade talks between Canada and the United States collapsed. On August 22, Washington imposed 50 per cent tariffs on a broad range of Canadian goods, and Ottawa's matching counter-tariffs took effect on September 8.
The new U.S. duties land heavily on manufacturing. In analysis published by the Macdonald-Laurier Institute, economist Trevor Tombe estimates that direct job losses would be considerable in electronic product manufacturing, textiles, furniture, plastic products and electrical equipment, with machinery, electronics, plastics and rubber facing the highest projected losses overall. Some of the same plants whose purchasing managers reported rising optimism in August are now exposed to a 50 per cent duty on part of what they sell south of the border.
What it means for staffing
Three implications stand out.
The manufacturing market is splitting in two, and client portfolios should be read that way. Producers oriented toward domestic demand showed genuine hiring momentum in August. Producers selling tariffed goods into the U.S. face a materially different outlook than the one they described when they answered the survey. Staffing firms should segment their manufacturing clients by export exposure now, before order books make the distinction for them.
Stockpiling creates demand that can reverse quickly. Precautionary purchasing and inventory building generate short-term need for warehousing, material handling and logistics labour. But Tombe's analysis finds that once indirect effects are counted, transportation and warehousing faces the largest disruption of any sector. Light industrial and distribution volumes tied to export-exposed customers could soften fast if those customers pull back.
Recent gains argue for caution on conversions. Manufacturing's hiring streak is young, and the sector's year-over-year employment is flat. Employers facing a demand shock also now have access to an expanded federal work-sharing program, which lets them cut hours for permanent staff rather than lay them off. That cushion protects the core workforce. Contingent workers usually sit outside it, which means assignment reductions often come before any permanent layoffs. Temp-to-perm conversions in export-exposed plants deserve a closer look than they did a month ago.
The first read on whether August's optimism survived the tariff shock arrives with the September PMI in early October. Until then, the August report is best understood as a portrait of the sector on the eve of a new trade shock, not a forecast of what comes after it.