The latest Business Outlook Survey points toward rebounding hiring intentions

The first-quarter Bank of Canada Business Outlook Survey offers a nuanced portrait of a Canadian economy in transition, where a resilient private sector is navigating the complex interplay of geopolitical tension and shifting inflationary pressures. For the staffing industry, the latest data suggests a stabilization of the labor market, as hiring intentions have rebounded to meet or exceed long-run averages. This recovery in sentiment is particularly noteworthy given that only 9% of firms now budget for a recession, a sharp decline from the 22% reported in late 2025. This newfound optimism appears rooted in a slow improvement in per-capita domestic demand and a surge in public spending related to large-scale infrastructure and defense projects.

While the broader economic slack is being gradually absorbed, the survey highlights a divergent reality between capital-intensive sectors and those reliant on discretionary household spending. Firms unaffected by ongoing trade tensions are reporting robust investment plans, yet a distinct weakness persists in the consumer goods sector. Data from the Canadian Survey on Business Conditions confirms that households are increasingly scaling back non-essential purchases as they grapple with the cost of living. For recruiters and workforce planners, this implies that while aggregate labor demand is healthy, job growth will likely be concentrated in industrial, export-oriented, and public-sector-aligned industries rather than the retail or hospitality sectors.

The most significant headwind identified in the Q1 report is the recent upward trend in business inflation expectations. Although long-term outlooks remain relatively anchored, short-term expectations for one-year and two-year inflation rose noticeably between February and late March, settling between 3% and 4%. This shift is largely attributed to the volatility of global oil prices and rising input costs linked to Middle East instability. Despite these pressures, many firms indicate that their ability to pass these costs onto consumers is limited by intense competition and soft domestic demand. This margin squeeze suggests that while businesses are eager to hire to meet operational needs, wage growth may face downward pressure as companies struggle to maintain profitability under higher input costs.