Economic Journal
The latest data from the RBC Consumer Spending Tracker reveals a notable shift in Canadian economic momentum as the country enters early 2026. Following a period of resilient, promotion-driven activity in late 2025, cardholder spending has begun to soften, signaling a transition from post-pandemic recovery to a more measured phase of normalization.
The January 2026 data shows that core retail sales fell on a three-month average, with the sharpest pullbacks appearing in discretionary goods and essentials. While some of this decline can be attributed to severe winter weather and the natural retracing of elevated holiday spending, the broader trend suggests that households are becoming increasingly cautious. Spending on dining has continued a two-quarter slowdown, and grocery expenditures have softened meaningfully. A rare bright spot remains the travel sector, where demand has stayed relatively steady, suggesting that Canadians are still prioritizing experiences even as they trim budgets for tangible goods and daily necessities.
Our own analysis along with recent reports from the Bank of Canada highlight a “low hire-low fire” dynamic that has characterized the market recently. While layoffs remain historically low, hiring rates have seen a significant decrease compared to pre-pandemic averages. The softening in consumer-facing sectors (particularly retail, dining, and construction) is likely to reinforce this cautious hiring environment. As discretionary spending slows, businesses in these industries are less likely to expand their headcounts, opting instead for a "wait-and-see" approach to talent acquisition.
Recruiters are finding themselves in a landscape defined by heightened selectivity and structural shifts. Robert Half Canada indicates that while 55 per cent of employers still plan to hire for permanent roles in early 2026, the focus has shifted toward specialized skills rather than general volume. In an environment where consumer demand is less predictable, companies are increasingly leaning on contract and temporary talent to manage immediate needs without committing to long-term overhead. This "contingency hiring" strategy allows firms to stay agile, addressing critical project gaps while navigating the broader economic deceleration.
Furthermore, regional divergence is becoming a critical factor for recruitment strategy. While the Atlantic provinces and the Prairies have shown relative stability, major hubs like Ontario and British Columbia are facing headwinds from high debt servicing costs and a projected deceleration in population growth. This regional reshuffling suggests that recruiters may need to pivot their focus toward commodity-producing regions, which TD Economics predicts will continue to outperform, or sectors like travel and entertainment that have defied the general spending slump.
The cooling momentum reflected in credit card data serves as a leading indicator of a more balanced, albeit slower-growth, economy. For those in the recruitment and HR space, the era of rapid, broad-based expansion has given way to a cycle where efficiency and specialized expertise are the primary drivers of demand. Success in this market will depend on the ability to identify talent that can navigate structural adjustments, particularly as industries integrate new technologies to offset the impacts of a softening consumer base.