After months of contraction, Canada’s economy inched forward in July. Real gross domestic product rose by 0.2 percent, slightly better than Statistics Canada’s early estimate, and a welcome reprieve after a spring defined by tariff shocks, wildfires, and slowing global demand. For staffing firms and HR professionals, however, the rebound is not a clear turning point.
The July expansion was carried largely by goods-producing industries. Manufacturing, which had endured one of its sharpest quarterly contractions since the 2008–09 financial crisis, rebounded by 0.7 percent. Mining production jumped 2.6 percent, while oil and gas extraction rose nearly 1 percent as facilities recovered from wildfire disruptions earlier in the year. Construction showed modest improvement, with non-residential and engineering projects advancing slightly.
But the cracks are visible. The iron and steel industry, a direct casualty of U.S. tariffs, plunged another 19 percent in July, leaving output nearly 30 percent below last year’s level. Even with most Canadian exports still shielded by CUSMA exemptions, tariff-exposed sectors remain under extraordinary pressure. Wholesale and manufacturing sales data for August have already reversed some of July’s gains, suggesting fragility rather than momentum.
Service industries fared less well. Output rose just 0.1 percent, dragged down by a decline in retail trade. Consumer resilience has helped soften the blow, early readings for August show retail sales up 1 percent and card transactions holding steady, but the pattern points to volatility. Housing markets, on the other hand, offered a rare lift, with resales boosting activity at brokerages by more than 3 percent. Transportation and warehousing also expanded as pipelines, trucking, rail, and water transport moved more goods.
What about the labour market?
Yet for all the noise in production data, the real story lies in the labour market. Canada shed 66,000 jobs in August, the second straight month of losses, pushing the unemployment rate to 7.1 percent, the highest since before the pandemic. Core-aged men and women both saw steep declines, with part-time positions accounting for most of the drop, though full-time hiring has also cooled. Professional services, transportation, and manufacturing posted notable job losses, while construction offered one of the few bright spots.
The CSJ Hiring Index, our in-house measure of labour demand, reflected this turning point in August with a reading of 4.8 out of 10, a level that signals neither collapse nor resilience, but rather a market in flux. Employers are hiring, but more selectively, with roles in energy, logistics, and construction still seeing demand, while tariff-exposed manufacturing and white-collar professional services are slowing.
This divergence between GDP and employment complicates the picture for staffing firms. On one hand, a loosening labour market means a deeper candidate pool and greater opportunities for firms to place skilled workers who were previously hard to find. On the other, demand from client companies is uneven. Manufacturing clients, already hit by tariffs, are unlikely to expand staffing budgets soon. By contrast, construction, energy, and parts of transportation may see steady or even rising needs, particularly as large-scale projects move ahead.
Looking ahead
Looking ahead, the path is neither recessionary nor buoyant. Statistics Canada’s advance estimate for August GDP suggests activity was essentially flat, keeping third-quarter growth on track for a modest 0.5 percent annualized increase. That’s slow but positive: better than the contraction in the second quarter, but not enough to spark a hiring boom.
For staffing firms, the challenge is to lean into resilience where it exists. Candidate pipelines will be easier to build as unemployment rises, but client demand will require sharper targeting. Firms should position themselves not only in sectors like construction and logistics, but also as trusted advisers in industries under pressure, helping employers rethink workforce strategies under volatile trade and policy conditions.
Canada’s July GDP gain is a reminder that the economy has not tipped into outright recession. But with jobs declining and business investment hesitant, the labour market is entering a more complicated phase: one where staffing firms that read the crosscurrents correctly will stand out.