Staffing’s future: measured in output, not in hires
A glance into StatCan’s Q2 productivity report
The latest Statistics Canada release shows business-sector labour productivity fell 1.0% in Q2 2025, the sharpest quarterly drop since late 2022. Business output (real GDP) contracted 0.7%, the first decline in seven quarters, while hours worked still edged up 0.3%, meaning companies produced less with slightly more time on the clock.
The weakness was broad: 9 of 16 industries saw productivity declines. The steepest drops were in utilities (-4.0%), wholesale trade (-2.6%), and manufacturing (-2.1%), sectors closely tied to cross-border goods flows and particularly exposed to recent U.S.–Canada trade uncertainty. Construction dipped slightly (-0.1%).
Compensation dynamics also turned: hourly pay fell 0.5%, the first decline since early 2021. Because productivity fell faster than compensation, unit labour costs (the labour cost to make one unit of output) rebounded 0.5%. In plain language: even as pay cooled a touch, each unit made still got more expensive because output per hour fell.
Zooming out, this isn’t just an accounting quirk. Productivity is the backbone of wage growth that lasts. Persistent slippage tends to push firms toward cost control, workflow redesign, and selective hiring, especially in tradable-goods industries that can’t easily pass on higher costs. Early signs of that softer tone are visible in August’s labour report (net job loss, higher unemployment), though that release covers a later period and broader forces.
What this likely means for the labour market (next 3–6 months)
More selective hiring. Firms prioritize mission-critical roles that lift throughput: process engineers, automation specialists, supply-chain analysts, while slowing net headcount elsewhere. Expect tighter requisition approval and longer hiring cycles in goods-related sectors (manufacturing, wholesale, transport).
Efficiency over expansion. Operations teams will focus on debottlenecking, maintenance uptime, and quality yield (“sweating the assets”) instead of adding shifts. That often shifts demand toward contract talent for targeted fixes rather than permanent expansion.
Wage pressure stabilizes at the margin. With hourly compensation down and unemployment up, bargaining power evens out, except for scarce technical skills that raise output (industrial automation, advanced machining, data/AI in ops).
Services keep hours, goods tread water. Services producers still grew hours (+0.3%) while goods stayed flat; so near-term hiring resilience is likelier on the services side, with goods industries more cyclical and sensitive to trade cross-winds.
Where staffing firms can win (practical plays)
1) Productivity-first talent solutions
Package roles that directly move the productivity needle: continuous-improvement/lean leads, reliability engineers, industrial electricians, supply-chain planners, EDI/trade-compliance analysts, data engineers for OEE/throughput dashboards. Tie candidate shortlists to expected throughput, scrap-rate, or cycle-time improvements.
2) Project-based and contract squads
Offer SWAT teams for targeted outcomes: factory changeovers, preventive-maintenance backlogs, warehouse slotting/flow redesign, or ERP/WMS tuning. Outcome-priced statements of work (SOWs) help clients contain fixed costs while tackling bottlenecks.
3) Flexible ops capacity for a choppy goods cycle
In manufacturing and wholesale (both key to the Q2 pullback), propose peak-shaving rosters (on-call, weekend crews) and contract-to-hire for roles tied to export orders. This lets clients match labour to uncertain demand without overcommitting FTEs.
4) Workforce diagnostics as a service
Lead with a light productivity audit: map roles to value streams, calculate output per labour hour by line/shift, and quantify where specific skills would lift capacity. Convert findings into a hiring roadmap with a 90-day pilot. (Anchor KPIs to StatCan’s productivity concepts so the CFO sees apples-to-apples.)
5) Training for adjacency and automation
Build micro-upskilling for skill-adjacent moves (e.g., machinist → CNC programmer, picker → inventory analyst, QA tech → process-data specialist). Pair placements with short, vendor-agnostic automation training to protect placements and raise client ROI.
Bottom line
A one-quarter drop doesn’t make a trend, but the combination of falling output, rising hours, and higher unit labour costs is a red flag for margins and a nudge toward precision hiring over broad expansion. For employers, the smartest next hire is the one that unlocks throughput. For staffing firms, the winning play is to sell productivity, not headcount, and to prove it with roles, teams, and training that move the numbers StatCan is watching.