Canada’s services sector finds its footing, but hiring hesitation remains
Services PMI - July 2025
Canada’s services economy showed tentative signs of life in July, offering a reprieve after months of contraction. The latest S&P Global Services PMI rose to 49.3, up from June’s bruising 44.3, marking the softest downturn in eight months. Though the index remains below the neutral 50 mark that separates expansion from contraction, the improvement was enough to spark cautious optimism among business leaders and policymakers alike.
The upturn was most evident in forward-looking measures. New orders continued to fall, but at a gentler pace, while business confidence jumped. The Future Activity Index climbed to 60.9, its highest level in over a year, reflecting hopes that conditions will improve in the months ahead. Firms pointed to expectations of steadier demand and even potential boosts from international events like the FIFA World Cup. “There are reasons for hope,” Andrew Harker of S&P Global noted, underscoring the shift in sentiment from outright pessimism earlier this year.
Still, the July reading also revealed the fragility of the recovery. The sector has not yet crossed back into growth territory, and the scars of weak consumer demand, higher borrowing costs, and global trade headwinds remain visible. Many companies are reluctant to commit to expansion, choosing instead to hold back on hiring until signs of durable momentum appear.
That hesitation is particularly relevant for the staffing industry. For months, services firms have been cutting back, postponing new hires and leaning more heavily on existing staff. July’s softer contraction suggests that the worst of the pullback may be behind them, but few employers are rushing to expand payrolls. For staffing firms, the challenge is to navigate this interlude — a period defined less by mass layoffs than by a cautious pause, where flexibility is prized but large-scale hiring is still on hold.
There are, however, glimmers of opportunity. The surge in business confidence points to a rebound that could materialize later this year. Temporary and contract staffing, in particular, stand to benefit as companies look for agile workforce solutions to meet uneven demand. A rebound in industries tied to tourism, retail, and logistics could offer quick wins, especially if consumer spending keeps strengthening. Meanwhile, sectors such as professional services and hospitality may lag longer, leaving staffing firms to calibrate their efforts carefully.
The broader economic picture complicates the outlook. Manufacturing, too, remained in contraction, though its decline moderated. At the same time, the Ivey PMI, a wider measure of Canadian economic activity, jumped to 55.8, its strongest reading in a year. Crucially, the employment component of that index tipped into expansion, hinting that labor markets may be more resilient than the services PMI alone suggests.
For staffing executives, the message is clear: Canada’s services sector is edging closer to recovery, but it is not there yet. Employers are signaling intent rather than action, optimism rather than investment. The hiring surge many in the industry are hoping for remains on the horizon, not in the present.
If the July data is any guide, staffing firms will need to balance prudence with readiness. The demand may not be here today, but it is approaching, and those who prepare now will be best positioned to meet it when it arrives.