Recruiting skilled employees second most commonly expected obstacle, finds StatCan
Canadian businesses are reporting improved optimism for 2026 even as they continue to face cost and labour challenges, according to new data from Statistics Canada (StatCan).
In the first quarter of 2026, nearly three-quarters (73.1%) of businesses said they were either very or somewhat optimistic about their outlook over the next 12 months, up from 66.7% in the third quarter and 66.3% in the fourth quarter of 2025, according to the report.
“In this macroeconomic context, Statistics Canada conducted the Canadian Survey on Business Conditions from January to February 2026,” the agency said, noting that the survey captures “the environment businesses are currently operating in and their expectations moving forward.”
The survey period followed a weak end to 2025, when real gross domestic product was essentially unchanged in November after a 0.3% decline in October. Consumer inflation rose 2.3% year over year in January 2026, after a 2.4% increase in December 2025, while overall employment edged down by 25,000 (-0.1%) and the employment rate fell to 60.8%.
One‑third of business leaders are planning major acquisitions amid a more favourable economic and policy environment, according to previous research from KPMG Canada.
Overall, Canadian employers headed into 2026 with strong confidence in their own performance despite concerns about the global economy, underpinned by accelerating investment in artificial intelligence (AI), according to previous research from the IBM Institute for Business Value (IBV).
Cost-related pressures ease slightly but remain elevated
Cost-related challenges remain widespread but have eased modestly, according to StatCan. In the first quarter of 2026, 59.2% of businesses across Canada expected cost-related obstacles over the next three months, down from 61.2% in the fourth quarter of 2025. Cost-related obstacles include:
- inflation
- input costs
- interest rates and debt costs
- insurance
- real estate and property taxes
- transportation costs
In January 2026, prices of raw materials purchased by manufacturers – as measured by the Raw Materials Price Index – rose 7.7% month over month and 8.0% year over year. Average hourly wages increased 3.3% on a year‑over‑year basis in January, following 3.4% growth in December 2025.
Inflation remained the most commonly expected obstacle: just over two-fifths (40.8%) of businesses anticipated inflation would be an obstacle over the next three months. Businesses most likely to report inflation as an expected obstacle were in accommodation and food services (60.7%), agriculture, forestry, fishing and hunting (50.1%), and wholesale trade (48.2%).
When asked to identify the single most challenging expected obstacle over the next three months:
- 10.7% of businesses cited recruiting skilled employees
- 10.5% named inflation
- 6.8% selected the cost of inputs
Recruiting skilled employees a key challenge
Recruitment emerged as a major issue. “Recruiting skilled employees is the second most commonly expected obstacle, anticipated by one-quarter (25.3%) of businesses,” StatCan reported. The concern was most pronounced in:
- administrative and support
- waste management and remediation services (39.0%)
- construction (37.5%)
- accommodation and food services (34.2%)
Sales and pricing expectations also reflected cautious optimism. In the first quarter of 2026, 18.1% of businesses expected sales of goods or services to increase over the next three months, up from 16.3% in the fourth quarter of 2025. At the same time, 14.8% expected sales to decrease, and 23.2% anticipated an increase in the selling price of their goods or services. Businesses most likely to expect higher selling prices were in:
- accommodation and food services (35.1%)
- retail trade (29.7%)
- manufacturing (29.5%)
US tariffs and cost pass-through
The StatCan survey also found that nearly one-third (32.0%) of all businesses, whether engaged in trade or not, reported that tariffs imposed by the United States on imports from Canada had a negative impact on their business over the 12 months prior to the survey. Businesses in manufacturing (51.2%), agriculture, forestry, fishing and hunting (47.1%), and wholesale trade (45.7%) were most likely to report negative effects.
In contrast, 1.4% of businesses said the tariffs had a positive impact, 51.2% reported no impact and 15.4% were unsure.
Over the same 12‑month period, 26.8% of businesses said they had passed cost increases due to tariffs on to customers, while 34.5% had not done so and 38.6% reported no cost increases from tariffs.
Looking ahead 12 months, 34.1% of businesses said they were very likely or somewhat likely to pass cost increases due to tariffs on to customers, 14.4% were very unlikely or somewhat unlikely, 15.0% were unsure and 36.5% did not expect any cost increases due to tariffs.
Recently, in a 6–3 ruling, the U.S. Supreme Court concluded it was not legal for President Donald Trump to use the International Emergency Economic Powers Act, better known as IEEPA, for his “Liberation Day” tariffs and fentanyl‑related duties on Canada, Mexico and China. Trump, however, later cast the Court’s tariff ruling as a green light to escalate trade measures.
