Canadian small businesses see wages rise as hiring slows

Wages across nearly 3,000 Canadian small and medium-sized businesses rose 4.2% year on year in April, according to Employment Hero. Employment across those businesses fell nationally over the same period.

The figures point to a split labour market: pay continued to rise faster than inflation, which stood at 2.4%, while hiring remained uneven across sectors.

The data contrasts with broader signs of caution in Canada's labour market. Statistics Canada's latest Labour Force Survey showed national employment was largely flat in April amid continued economic uncertainty.

Within the small-business segment tracked by Employment Hero, sectors tied to summer consumer spending showed stronger momentum than the wider market. Employment across retail, hospitality and tourism increased 3.8% from a year earlier.

Pay growth in those industries was stronger still. Wages in retail, hospitality and tourism climbed 10.6% year on year in April, the fastest increase in the dataset.

The figures suggest employers in customer-facing industries are lifting pay as they prepare for seasonal demand. Restaurants, bars, tourism operators and other leisure businesses typically increase staffing ahead of warmer weather and major summer events.

Shift in hiring

The data also showed a marked rise in casual work. Casual employment increased 12.7% year on year, suggesting many businesses are relying more heavily on flexible staffing arrangements as they manage uncertain trading conditions.

That shift may reflect a balancing act for smaller employers. Higher wage costs can make it harder to commit to permanent hiring, especially when consumer demand remains difficult to predict and borrowing conditions remain tight.

For workers, the pattern presents a mixed picture. Wage growth above inflation points to improving real pay for some employees, but weaker overall employment and greater use of casual roles may limit security and hours for others.

Small and medium-sized businesses are often seen as a sensitive indicator of labour market conditions because they tend to react quickly to changes in costs and demand. Their hiring decisions can provide an early read on where pressure is building and where activity is picking up.

Retail, hospitality and tourism have been among the sectors most exposed to swings in household spending over the past several years. Stronger wage growth in those industries may signal tougher competition for available workers as employers try to staff up for the summer.

At the same time, the broader decline in employment across the businesses in the dataset underlines the limits of that rebound. Gains in seasonal industries have not been enough to offset weakness elsewhere in the small-business economy.

Diverging signals

The contrast between rising pay and softer headcount growth is likely to draw attention from policymakers and economists watching for signs of strain in the jobs market. Faster wage growth can support household spending, but subdued hiring can also point to caution among employers.

The latest figures add to evidence that the labour market is not moving in one direction. Instead, conditions appear to be diverging by business size, industry and type of employment, with seasonal sectors expanding while many employers remain reluctant to add permanent staff.

Employment Hero's dataset is based on first-party information from nearly 3,000 Canadian small and medium-sized businesses. The April results suggest some parts of the market are still growing despite a more subdued national backdrop.