The Staffing industry is reaching a "bumpy plateau" with soft sales and cautious hiring

Bank of Canada's Business Outlook Survey Q2-2025

The Bank of Canada’s latest Business Outlook Survey paints a cautious and subdued portrait of Canada’s labour landscape, offering a clear signal to staffing agencies: demand for temp and contract workers will likely remain lukewarm in the short term.

Interviews conducted with about 100 senior managers across Canada reveal a business environment fraught with persistent headwinds. While companies appear to be navigating through the fog of trade-related uncertainty—particularly tariffs that have disrupted cross-border supply chains—their hiring intentions remain subdued. Firms report weak demand, cautious staffing plans, and a desire to preserve flexibility amid volatility.

Soft Demand Clouds Hiring Plans

Survey respondents describe a landscape where sales projections remain fragile. Though some optimism is emerging (such as modest recovery in export outlooks), most firms continue to hold back on expanding their workforce. In fact, the balance of opinion on future sales growth dropped sharply, suggesting businesses anticipate few new job openings. With existing capacity sufficient to meet current demand, companies are not just slow-walking hiring—they’re effectively postponing it.

For staffing firms accustomed to scaling workforce provision alongside broader economic expansion, this spells a difficult few quarters ahead.

The survey emphasizes that tariffs remain a dominant concern for Canadian businesses. Elevated import costs and unpredictable US trade policy are narrowing profit margins. Firms feel squeezed, yet hesitant to raise prices due to sluggish sales. The result: cost pressures abound, but employment growth is not a priority.

Labour supply, meanwhile, isn't the issue—it's demand. Canada’s labour market appears to have modest slack, with hiring decelerating, vacancy rates flattening, and no widespread crisis of unfilled positions.

Implications for Staffing Agencies

Staffing firms, which traditionally thrive in tight labour markets by exploiting volatility and persistent demand for temporary workers, will find the current environment challenging. Here’s a closer look at the near‑term dynamics:

• Reduced Volume of New Openings
  With firms remaining cautious, demand for contract and temporary placements may shrink. Staffing firms might see fewer requisitions for workers as companies prefer to draw down on existing headcount rather than expand.

• Increased Pricing Pressure
  Just as manufacturers are reluctant to raise prices (despite higher costs), staffing firms may face pressure to moderate or reduce placement fees. Clients hesitant to add full-time headcount may also negotiate harder on margins.

• Focus on Cost-Efficiency and Flexibility
  In lieu of new hires, businesses may rely more heavily on short-term, flexible staffing arrangements. Staffing firms that can offer affordable, skilled workers on brief assignments are positioned to benefit—even if total placement volumes remain flat.

• Sector-Specific Opportunities
  Industries tied to essential services or trade-resilient sectors may continue hiring. Agencies specializing in those niches—say, healthcare, logistics, or infrastructure—could find pockets of demand amidst broader weakness.

Despite lacklustre hiring intentions, wage pressures have eased. Firms report stable or declining wage growth, with no signs of aggressive bidding wars. That puts further constraint on staffing firms’ ability to negotiate higher wages on behalf of workers or to command premium markups.

Youth and entry-level workers remain more exposed to labour market tightening, indicating potential demand for entry-level placements. If staffing firms can pivot to meet downstream demand for wage-sensitive roles, they may smooth some volatility.

The Bank of Canada’s latest Business Outlook Survey suggests the economy is entering a “bumpy plateau” phase. Sales remain soft, trade uncertainty lingers, and hiring is cautious. Still, full-scale reductions in force are limited—rather, hiring is delayed or frozen.

For staffing firms, that means a landscape of steady but subdued opportunity. The near-term priority will be to lean into flexible staffing models, optimize cost efficiency, and segment focus toward resilient sectors. Those agencies that can pivot quickly, manage pricing creatively, and align with client caution may weather the storm—and position themselves for the next cycle of growth, once clarity returns to trade policy and demand firm.