If you’re a Canadian worker hoping your next raise will help offset rising grocery bills, higher rent, or ballooning mortgage payments, I’ve got some bad news: don’t hold your breath. The data is stacking up, and it suggests that the days of stronger salary bumps are behind us at least for now.
Let’s be blunt: businesses are nervous. Canada’s economy is tangled in a messy trade war with both the U.S. and China, and the ripple effects are showing up in payrolls. Tariffs mean higher costs, which for many companies translate into tough choices slowing production, cutting hours, or in some cases, considering shutting their doors entirely.
And the numbers don’t paint a rosy picture. Statistics Canada recently reported that hourly compensation actually fell by 0.5 per cent in the second quarter of this year the first drop since 2021. Hours worked barely grew, especially in the services sector, and overall labour productivity plunged by one per cent. To put that in perspective, that’s the steepest decline we’ve seen since late 2022. In other words, workers are putting in time, but the economy isn’t getting much more out of it.
For employees, this translates into a reality check. Yes, businesses still plan to increase salaries, but the hikes are shrinking. According to consulting firm Normandin Beaudry’s latest salary report, Canadian organizations are budgeting an average raise of 3.1 per cent in 2026. That’s lower than the 3.2 per cent average in 2025 and miles behind the cost-of-living pressures most households are facing.
Job postings tell the same story. Data from Indeed shows advertised wages grew just 2.6 per cent year-over-year as of July 2025, down from 3.2 per cent the year before. Put simply, pay packets aren’t keeping up with the financial squeeze.
So, what’s driving the slowdown? While the trade war and tariffs are certainly factors, the bigger culprit may actually be cooling inflation. Employers track salaries against inflation. With interest rates pushing inflation lower, the urgency to hand out bigger raises is fading. As Darcy Clark of Normandin Beaudry put it: “The lion’s share of employers are ratcheting down their budgets.” The domestic economy, inflation trends, and global uncertainty are all pushing in the same direction—downward.
The bottom line? Workers hoping their next raise will be a lifeline against the cost-of-living crisis may be disappointed. Businesses are more cautious than they’ve been in years, and productivity challenges only add fuel to the fire. Unless inflation surges again or trade tensions ease dramatically, salary growth looks set to limp along.
And that leaves Canadian workers with a tough reality: the financial squeeze isn’t going away anytime soon, and pay raises may not be the relief many are counting on.
