Ask Canadian business leaders whether they plan to grow their teams over the next six months, and most say yes. Ask them what worries them most about running the business day to day, and the answer isn’t finding customers or surviving a downturn. It’s getting more output from what they already have, and managing what it costs to pay the people doing the work. That contradiction, wanting to grow while feeling squeezed by the fundamentals of growth, is one of the more telling signals in Canada’s economy right now, and it deserves more attention than it’s getting.
A Genuinely Mixed Signal
New research from Employment Hero, surveying 600 Canadian business leaders, captures this tension clearly. Sixty-six percent of respondents expect some form of hiring over the next six months, and 58 percent describe themselves as optimistic about their business outlook. At the same time, when asked to name their biggest operational pressure, 41 percent pointed to productivity, and 39 percent pointed to wages, ahead of concerns about customer demand or broader economic conditions.
This isn’t a contradiction so much as a genuine shift in how growth is being approached. Businesses aren’t backing away from expansion. They’re attaching a condition to it: new hiring increasingly has to demonstrate it improves efficiency, not simply add headcount for its own sake. That’s a meaningfully different posture than the hiring conversations of a few years ago, when adding people and adding output were treated as roughly the same thing.
The Deeper Story: Canada’s Productivity Problem
This pressure doesn’t exist in isolation. It sits on top of a structural challenge the Bank of Canada has been unusually direct about in its own research: Canada’s weak productivity growth. The relationship the Bank describes is what it calls a vicious circle. Weak productivity limits how much businesses can afford to raise wages without cutting into margins or raising prices. Slower wage growth then weakens household demand for what businesses are selling. Facing sluggish demand, businesses become less inclined to invest in the equipment, technology, and training that would actually improve productivity in the first place. Each part of the cycle reinforces the next.
The scale of the gap is real. Research from the Centre for the Study of Living Standards found that had Canadian real wages grown in line with productivity between 2000 and 2019, average total compensation would have been roughly $2,900 higher per worker annually by the end of that period.
There’s a structural piece to this too. Canada’s private-sector share of total employment has fallen from 81.2 percent in 1999 to 78.5 percent in 2024, a meaningful shift over that period. Over the same stretch, the private-sector employment share in the United States actually increased, from 85.8 percent to 86.5 percent.
Where AI Fits, Cautiously
Given how central AI has become to nearly every conversation about productivity right now, it’s worth looking at what the actual adoption data shows rather than the broader narrative around it. Statistics Canada reports that 19.2 percent of Canadian firms were using AI to produce goods or deliver services in 2026, up seven percentage points from the previous year, a genuinely fast pace of adoption.
Earlier Statistics Canada research found AI-adopting firms report measurably stronger productivity than non-adopters, a gap of nearly 17 percentage points in one comparison.
That’s a meaningful signal, but it comes with an important caveat: correlation between AI adoption and stronger productivity doesn’t necessarily mean AI adoption alone is causing that gap. AI adoption is one input among several, not a silver bullet that resolves the broader structural gap on its own.
What Businesses Are Actually Doing About the Wage Side
Salary planning data offers a useful window into how employers are navigating the pressure specifically around compensation. Employer surveys for 2026 project average base salary increases of roughly 3.1 to 3.5 percent for non-unionized staff, a continued slowdown from the sharper wage growth of recent years, though still expected to outpace inflation for a second consecutive year.
Fewer than 2 percent of employers plan outright salary freezes. Technology, healthcare, and finance are projected to see the highest salary increases, alongside stronger growth in Ontario and Quebec specifically. Business services, by contrast, are expected to see the smallest increases.
What This Means for Workforce Planning
For Canadian business and HR leaders, this data suggests a useful reframing of what “hiring plans” should actually mean heading into the next two quarters. The question worth asking internally isn’t simply how many people the organization plans to add. It’s whether each planned hire is tied to a clear productivity or capability gain, rather than treated as a default response to growth or workload pressure.
This doesn’t mean treating every hiring decision as an efficiency audit. It means recognizing that the businesses navigating this moment most successfully are the ones being deliberate about the connection between headcount and output, rather than assuming the two automatically move together.