Write to: Minh Dang mdang@staffingjournal.ca
In July 2025, Canada’s headline inflation dropped to 1.7% year-over-year, easing from 1.9% in June, according to Statistics Canada. A key driver of this slowdown was a 16.1% annual decline in gasoline prices, owed in part to the removal of the consumer carbon surcharge. Excluding gasoline, the CPI still rose by 2.5%, unchanged from the two prior months.
Digging deeper, the Bank of Canada’s preferred core inflation measures (CPI-median) crept up to 3.1% and CPI-trim held at 3.0%, continuing to hover near the upper boundary of the central bank’s 1–3% target range.
However, the three-month annualized trend provided more encouragement: core inflation’s recent momentum slowed to around 2.4%, down from 3.4% in June.
Despite this easing, price pressures remain widespread as over 37% of CPI components are rising faster than 3%.
Key contributors include:
Food prices, especially groceries, accelerated to 3.3–3.4% year-over-year, spanning items like confectionery, coffee (up nearly 29%), grapes, and fresh fruit.
Shelter costs rose by 3.0%, marking the first increase since early 2024, driven by rent increases (5.1%) and a smaller decline in natural gas costs.
These dynamics temper the CPI’s easing narrative and underscore that inflation remains uneven across categories.
What’s Driving the Bank of Canada’s Thinking
Many economists interpret July’s data as opening the door (albeit tentatively) for a possible interest rate cut as early as the Bank’s September 17 meeting. Markets shifted swiftly: probability of a cut rose from the low 30% range up to about 40%.
Scotiabank points out, however, that data volatility and large statistical revisions, particularly to core inflation metrics, dilute confidence. Past months have seen revisions of up to 0.7 percentage points in the monthly annualized figures. Their conclusion: July’s softer core inflation “is just one set of readings ahead of more evidence needed” before policy action.
What This Means for Staffing Firms and the Labour Market
So, how does all this play out for staffing firms and the broader job market? Here is the answer in 5 points;
Slower inflation can temper wage pressure, especially in sectors driven by consumer demand. If households feel less squeezed, firms may face less pressure to raise wages, potentially stabilizing recruitment costs for staffing agencies.
Persistent cost pressures in food and shelter, however, keep wage expectations elevated among workers, especially those serving essential needs. Staffing firms in the hospitality, healthcare, or social services sectors may still face labor cost inflation.
If the Bank of Canada does cut rates, it could boost hiring and reduce financing costs, providing some tailwind for businesses to expand payrolls. Staffing firms could benefit from increased demand for temporary labour.
Conversely, if revisions continue clouding the picture, the BoC may hold off on cuts, maintaining higher borrowing costs and prompting caution in hiring decisions. Agencies may see more cautious client appetite for expanding staff.
In a mixed inflation landscape with a slowing headline (yet stubborn core), costs and wages could move in different directions across sectors. Staffing firms may need to tailor strategies: for example, more competitive pay in tight sectors versus leveraging lower-cost opportunities where inflation is easing.
Our Final Take
The July CPI data signals a modest, yet meaningful, softening of inflation in Canada, but it’s nuanced. The sharp drop in gasoline prices helped headline numbers, yet broad-based core inflation and rising food and shelter costs remain a concern. The Bank of Canada may have enough evidence now to consider a rate cut, but market expectations hinge on more data in the weeks ahead.
For staffing firms, the picture is one of cautious optimism. Lower headline inflation and potential rate relief could ease hiring conditions. Yet pockets of cost pressures and ongoing uncertainty about inflation trends suggest firms should remain agile, sector-sensitive, and ready to adapt to shifting expectations in wages, demand, and monetary policy.