Canada’s factory slowdown deepens, and the job math is starting to bite
Manufacturing PMI - October 2025
Canada’s factories ended the third quarter on a weak note. The S&P Global Manufacturing PMI slid to 47.7 in September, down from 48.3, signaling a fifth straight month of contraction in output and new orders, both sub-indices fell further into the red. The survey also noted outright job losses at manufacturers as confidence softened.
The turn in hiring is already showing up in official data. In August alone, manufacturing employment fell by 19,000, and since the recent peak in January the sector has shed 58,000 jobs. That’s the clearest sign yet that firms who hoarded talent during the post-pandemic recovery are beginning to reset headcounts as orders fade.
What a Sub-50 PMI Usually Means for Jobs
Canada employs roughly 1.8 million people in manufacturing. When the PMI holds below 50 for multiple months, history suggests companies first freeze hiring and cut overtime, then reduce contingent roles, and finally trim permanent staff if demand fails to revive. Using that base, here’s a practical range of what the next two quarters could look like if the PMI stays below 50 through March:
Low impact (soft landing): Firms rely on shorter hours and attrition. Employment falls 1%–1.5% over six months, 18,000 to 27,000 jobs concentrated in temp/contract roles and select sub-sectors with weak pipelines (basic metals, furniture, some machinery).
Base case (gradual bleed): Headcount tracks new orders lower while managers protect core skills. Employment declines 2%–3%, 36,000 to 54,000 jobs spread across Ontario and Quebec’s auto/aero supply chains and parts of fabricated metals; Western food, wood and resource-linked plants hold up better.
High impact (orders keep sliding): If new business continues to fall and inventories normalize, cuts extend to permanent roles. Employment drops 4%–5%, 72,000 to 90,000 jobs akin to milder past downturns, not a 2009-style shock.
These ranges triangulate three anchors: the PMI signaling contraction and “job losses recorded” in September; August’s 19,000 decline in LFS; and a sector employment base a little north of 1.8 million. They’re directional, not a forecast but they give staffing leaders a live sense of magnitude.
Provincial Lens: Who Feels It First
Ontario and Quebec, home to autos, aerospace, and dense supplier networks, remain the most exposed to weak global orders. Expect sharper use of flexible staffing in southern Ontario’s auto parts corridor and around Greater Montréal’s aero ecosystem. Prairie and B.C. manufacturers tied to food processing, wood, and energy equipment are comparatively steadier, though any capex pause would ripple into machinery and fabricated metals. Atlantic plants (shipbuilding, food processing) are more likely to slow hiring than cut deeply. The mix aligns with recent monthly data showing broadening softness even as some transport-equipment niches posted brief gains earlier in the summer.
Spillovers You’ll Notice Outside the Plant
Manufacturing is only about a tenth of GDP, but it anchors long supply chains in transportation, warehousing, business services, and construction. In August, weakness was already visible in transport and professional services alongside the factory decline. If the PMI stays sub-50, watch for lower demand for drivers, quality techs, maintenance crews, and some engineering services as project work is deferred.
What This Means for Staffing Firms
Permanent placements: Expect more gatekeeping on full-time roles through winter. Offer clients “convert-to-perm” options with clear productivity metrics to de-risk commitments.
Temp/contract: This is where activity should hold up best. Build benches in quality control, industrial maintenance, EHS, production scheduling, and logistics. Skills managers reach for as they flex shifts.
Shift from volume to mix: Orders are uneven; clients will prize candidates who can straddle production + basic automation/PLC troubleshooting or logistics + inventory analytics.
Regional strategy: Double down on Ontario/Quebec with line-side fill rates and rapid-response rosters; lean into resource-linked roles in the West where demand is less elastic to global goods cycles.
The Wild Cards
Two offsets could limit the damage. First, lower price pressures in the PMI hint at easing input costs, which can cushion margins. Second, earlier GDP detail showed parts of transport equipment bouncing as supply snarls cleared. If those gains persist, they can partially counter softer categories. The balance, however, still tilts toward caution until new orders stabilize.
Bottom Line
A 47.7 PMI doesn’t guarantee layoffs but paired with August’s factory job drop and five months of shrinking orders, it argues for defensive staffing through winter. On current signals, a 36,000–54,000 manufacturing job slide over the next two quarters is a reasonable central case if contraction persists, with larger losses only if new business continues to deteriorate. For employers, flexibility is the safest currency. For workers and agencies, versatility and blending shop-floor know-how with light automation and logistics skills will define who stays busiest until demand turns.