Why lower inflation won’t slow Canada’s wage pressures anytime soon

The October inflation figures offer a picture of an economy where headline price pressures are easing, yet underlying forces continue to shape hiring decisions in complex ways. Annual inflation slowed to 2.2 percent, a modest step down from the previous month. Much of this improvement comes from sharply lower gasoline prices, which fell more than nine percent year over year. Food inflation also moderated, although grocery prices are still rising faster than the overall index. Beneath the headline number, core inflation remains close to three percent, suggesting that the slowdown is not yet broad based. Shelter costs remain elevated, particularly rent, which continues to increase at more than five percent. Insurance premiums and several household services are also adding to overall cost pressure.

For the labour market, this mix of easing headline inflation and persistent underlying costs creates a landscape where wage expectations remain firm. Workers continue to feel the effects of high housing and essential expenses, so compensation behaviour will track these realities more closely than the headline CPI. Even as inflation cools, the cost burden on households does not fall proportionally, which keeps wage demands elevated. This means organisations planning for early 2026 must prepare for labour costs that do not soften at the same pace as inflation.

Hiring decisions in the next three to six months will reflect this lag. While the easing of headline inflation may appear to relieve some budgetary strain, core inflation and essential cost pressures mean that competitive wage offers remain necessary. Firms that anchor pay decisions too closely to the headline rate risk higher turnover or stalled hiring, especially in sectors with ongoing talent shortages such as logistics, healthcare support, and selected technical roles.