Canadians looking for a salary or wage bump to help with the cost-of-living crunch may be in for disappointment as data suggests businesses are being more cautious — and as labour productivity dropped the most since 2022 amid the U.S. trade war.
“I think people should be cautious,” says Darcy Clark, senior principal in compensation with consulting firm Normandin Beaudry.
“There’s some lines of business or industries that are directly aligned to or impacted by the tariffs and the geopolitical trade wars.”
Put simply? Salary growth is poised to fall over the coming months into 2026, and businesses are slowing operations because of trade war uncertainty.
Canada’s trade war with the United States and China means many businesses are faced with higher costs due to tariff impacts.
In some cases, this may mean slowing production and reducing staff or hours worked.
Statistics Canada reports the second quarter saw hours worked grow by 0.3 per cent, which is down from 0.6 per cent growth in the first quarter, and the relative decline was led by the services-producing sector.
The amount workers were paid for those hours also decreased, according to the report, with hourly compensation falling 0.5 per cent in the second quarter, which was the first drop since 2021.
Get weekly money news
Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.
So those looking for work may find the labour market more competitive in the coming months, and that means business owners may not be in a hurry to raise salaries.
While most business owners who pay on salary models say they do still plan increases, those hikes may not be as much as in previous years, according to the results of a recent survey.
Normandi Beaudry released its Salary Increases report for 2026 on Tuesday, which asked more than 1,000 organizations across Canada about their plans for compensation.
Businesses surveyed included private companies, not-for-profit organizations, publicly traded entities with stocks available for purchase, and government organizations, along with Crown corporations.
The survey found Canadian businesses plan to increase salaries by an average of 3.1 per cent in 2026, down from a 3.2 per cent actual increase in 2025 versus a previous projection of 3.3 per cent.
According to job search site Indeed and based on job postings, in July 2025, wages and salaries in Canada grew an average of 2.6 per cent compared to a year prior, and that’s down from 3.2 per cent growth in July 2024.
“Advertised wages and salaries in Canadian job postings continued to rise over the past year, but the rate of growth slowed, as both the labour market and inflation cooled,” says economist Brendon Bernard at Indeed.
“Over the three months through July 2025, the Indeed posted wage tracker averaged 2.6 per cent year-over-year growth, down from 3.2 per cent growth a year earlier.”
According to Clark, the trade war outlook may be a factor leading to these trends, but cooling inflation as a result of higher interest rates may be playing a bigger role.
“The lion’s share of employers are ratcheting down their budgets,” says Clark.
“And the top reason really was domestic economic outlook — the Canadian market, the economy. Second was the inflation rate. So inflation ticking down means salaries track with inflation and the easing of the labour market. Then it was the kind of the geopolitical uncertainty with tariffs in the global market.”
Many small business owners say based on current tariffs, they may be looking at complete closures in the coming months.
That all comes as Statistics Canada on Wednesday also released the results of its labour productivity report for the second quarter of 2025 (April through June).
According to StatsCan, labour productivity is measured as gross domestic product (GDP) per hour worked.
The agency says overall labour productivity fell by one per cent in the second quarter, which is down from a nearly flat reading in the first three months of the year, and an increase of 1.2 per cent in the final three months of 2024.
StatCan notes the last time productivity declined so sharply was the fourth quarter of 2022, when it fell 1.1 per cent.
© 2025 Global News, a division of Corus Entertainment Inc.