Uneven economic picture fuels split in workforce planning strategies; slight growth preceded Iran war
Canada’s economy posted modest growth in January, supported by gains in resource extraction and construction even as manufacturing activity fell back, according to a Statistics Canada report released Tuesday.
Real gross domestic product rose a slight 0.1 per cent in January after a 0.2 per cent increase in December, according to the report. Strength was concentrated in goods-producing industries, which grew 0.2 per cent, while services-producing industries were essentially unchanged.
Mining, quarrying, and oil and gas extraction rebounded sharply, expanding 1.2 per cent in January. StatsCan linked the lift in oil and gas to increased crude petroleum extraction in Newfoundland and Labrador and Saskatchewan, alongside growth in natural gas extraction.
Construction also extended its run, up 1.1 per cent for a third consecutive month, with increases spanning residential and non-residential building work.
Different sectors face different pressures
For HR leaders, the split matters. Hiring pressure and wage dynamics are likely to look very different across sectors in early 2026, with energy and construction showing momentum, transportation facing disruptions and manufacturing still contending with production slowdowns.
Douglas Porter, chief economist at the Bank of Montreal, called the report a “pleasant surprise,” in a note to clients reported by CBC News.
“Canadian real GDP was firmer than expected in the first two months of the year, despite a seemingly endless winter and a slew of weak headline results from manufacturing and employment early in 2026,” Porter wrote. “Of course, this decent performance preceded the conflict in Iran and the consequent spike in gasoline and other fuel prices, but it suggests the economy was in somewhat better shape than anticipated heading into the turmoil.”
Manufacturing declines
Manufacturing, however, pulled in the opposite direction. StatsCan said the sector contracted 1.4 per cent in January, reflecting weakness across durable and non-durable goods. Auto-related activity was a key drag, with winter shutdowns and retooling work at Ontario assembly plants extending into January, weighing on production and exports.
Wholesale trade declined as well, led by motor vehicle and parts wholesalers, a move tied to weaker exports of passenger cars and light trucks and reduced auto output.
Transportation and warehousing slipped amid severe winter storms late in the month that disrupted transit and contributed to flight cancellations. That has immediate implications for HR teams in logistics, aviation, public transit, and distribution: absenteeism, overtime costs, contingency staffing, and safety protocols can all become more acute when weather knocks networks off schedule.
Retail trade shows gains
Some areas of consumer-facing activity were brighter, however. Retail trade increased, including gains at general merchandise retailers and motor vehicle and parts dealers. Finance and insurance rose, with higher trading activity and foreign investment in Canadian bonds contributing to the sector’s growth.
Real estate and rental and leasing edged lower, ending a long stretch of monthly gains as activity tied to home resales softened.
Looking ahead, Statistics Canada’s advance estimate points to 0.2 per cent growth in February, though the agency cautioned the figure is preliminary and will be revised.
Slow, fragile growth
The January report reinforces a theme HR executives have been navigating since late 2025: the Canadian economy isn’t moving in a straight line, and talent strategies need to be calibrated to sector realities.
Energy and mining employers may see tighter labour conditions if output continues to rise, particularly in specialized trades, operations roles and remote-worksite positions. Construction’s continued expansion can sustain demand for skilled trades and project management, while also intensifying competition for workers across residential, institutional and commercial builds.
Manufacturers and auto-linked supply chains, by contrast, may remain more cautious on hiring and scheduling while production normalizes.
Iran conflict adds uncertainty
Economists are also watching what the Iran war and higher crude prices could mean for inflation, consumer spending and interest rates.
“Canada’s economy looks to be off to a slightly better-than-expected start in 2026 after a lacklustre fourth quarter,” TD Bank economist Marc Ercolao said in his own note to clients Tuesday, reported The Canadian Press.
Ercolao said the January GDP figures should not affect the Bank of Canada’s next interest rate decision set for April 29.
The Bank of Canada held its benchmark policy rate steady at 2.25 per cent on March 18 and has signalled a wait-and-see approach as it evaluates how the oil shock affects inflation and growth.
Ercolao said the economic outlook in Canada is “highly dependent on how long and severe the conflict becomes,” according to The Canadian Press.
