Canada’s economy is entering a new phase: one that feels neither like a downturn nor a recovery, but something in between. The latest Financial Markets Monthly from RBC, titled “Central Banks Cut as Trade Walls Rise,” offers a clear signal: the era of steady expansion has given way to cautious trimming. The Bank of Canada has already resumed its rate-cutting cycle, and another reduction is widely expected this month, but these moves are meant less to spur growth than to cushion a slow drift downward.

The trade environment has become more hostile. Washington’s decision to expand tariffs under Section 232 hitting Canadian exports like softwood lumber, kitchen cabinets, and potentially even trucks and pharmaceuticals, has unsettled policymakers and business leaders alike. While these industries account for a modest share of national exports, they are vital to the economies of entire regions, from British Columbia’s forestry towns to parts of Ontario’s manufacturing belt. Each tariff announcement adds another layer of uncertainty, discouraging investment and hiring decisions that depend on predictability.

RBC’s economists expect real GDP to rise by roughly half a percent in the third quarter, a fragile pace supported mostly by household spending and public-sector activity. Business investment remains subdued, and export volumes are soft. The Bank of Canada, having already cut rates in September, is likely to deliver another 25-basis-point reduction in October. Yet monetary easing, RBC warns, will only partially offset the drag from weaker trade and fading confidence.

Beneath the surface, the labour market is slowly adjusting. After years of exceptional tightness, conditions keep loosening. Unemployment has crept higher, though without any sharp rise in layoffs. Job vacancies have eased, wage growth is stabilizing, and employers appear to be shifting from aggressive recruitment to cautious retention. RBC describes this as a “low hiring, low firing” environment; one where firms hesitate to shed workers, fearing they won’t find them again when demand recovers, but also refrain from expanding their payrolls.

The slowdown is uneven. Manufacturing and trade-exposed regions are most at risk, especially those tied to lumber, furniture, or vehicle parts. By contrast, sectors supported by public spending such as healthcare, education, and infrastructure, are likely to remain stable or even expand. The federal government’s readiness to tolerate larger deficits, combined with provincial investments in housing and green energy, will help sustain employment in those areas. Population growth, though slower than last year’s record pace, continues to support demand for services and construction, further cushioning the blow.

For staffing firms, this new phase marks a turning point. After several years of rapid placement growth and widespread labour shortages, the balance of power in hiring is evening out. Temporary and contract placements in cyclical industries particularly manufacturing, logistics, and construction, may soften as clients freeze hiring or scale back projects. Pricing pressure could also intensify, as clients test the market for lower mark-ups or extended payment terms.

But this is not a bleak picture. It is, rather, a moment of recalibration. As trade-related industries cool, others are beginning to warm. Government infrastructure programs, new housing initiatives, and healthcare expansions are all creating pockets of steady demand. Staffing firms that realign their business mix toward these sectors and toward public contracts in particular could maintain strong activity even as private investment stalls.

The geography of opportunity may also shift. Communities less exposed to cross-border trade, or those benefiting from domestic infrastructure projects, may become new hubs of demand. Staffing firms with a national footprint can redeploy recruiters and talent pipelines to follow those trends, ensuring continuity of revenue even as some regions slow.

Longer term, the combination of tariff uncertainty and cautious corporate investment may push more firms toward flexible workforce models. Rather than committing to permanent hires, many will rely on contingent labour, project-based staffing, and specialized contract roles that offer adaptability without long-term costs. That plays directly into the strengths of staffing agencies, especially those offering consultative or managed-service solutions rather than pure transactional placements.

The next year will therefore test adaptability more than resilience. Canada’s labour market is not collapsing; it is evolving into a more measured, uneven, and cautious environment. The slowdown is real, but so is the opportunity; for firms that read it early. Those that can pivot toward stable sectors, deepen partnerships with public institutions, and help clients plan their workforce strategies in an age of uncertainty will find that even in a cooling economy, growth remains possible.

As central banks cut and trade walls rise, the story for Canada is one of quiet transformation rather than crisis. The challenge for staffing firms will be to see the nuance in that transition to shift not away from growth, but toward the new places where it is quietly emerging.

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