Payroll data shows Canada's labour market steadying — and that shift could reshape 2027 compensation budgets
Canadian payroll employment grew for a fourth straight month in July. But the more telling number for HR and total rewards leaders is what didn't move much: average weekly earnings growth slowed to 3.2%, continuing a gradual deceleration Statistics Canada's Survey of Employment, Payrolls and Hours has now tracked across several consecutive releases.
For compensation teams heading into 2027 budget season, that combination of steady hiring and cooling wage growth suggests employers may be regaining some leverage they lost during the tightest years of the post-pandemic labour market.
Payroll employment rose by 26,100 positions in July, bringing cumulative gains since March to 124,200. Job vacancies held at 501,000 for a seventh consecutive month of little change.
None of these figures signal a market in distress. But the combination — modest job growth, flat vacancies, and earnings growth easing from 3.4% in June to 3.2% in July — points toward a labour market that has found a plateau rather than one still working through post-pandemic volatility.
Deceleration building for months
This isn't a one-month blip — payroll employment was nearly flat in June, rising by just 4,800 positions — a sharp pullback from May — even as average weekly earnings climbed 3.4% year over year, the same pace that has now eased into July's reading.
That June slowdown followed a similar deceleration in May, when payroll gains cooled sharply and StatCan data pointed to a labour market stabilizing rather than tightening.
Strung together, May through July tell a consistent story: hiring is holding up, but the wage-growth momentum that defined 2023 and 2024 keeps easing month over month.
HR leaders building 2027 compensation cases could find that multi-month pattern more persuasive than any single data point. A CFO skeptical of another above-inflation salary increase cycle can now be shown three consecutive StatCan releases moving in the same direction, strengthening the case for holding merit budgets closer to the 3% to 3.3% range rather than defaulting to prior-year assumptions.
Where hiring leverage still exists
The aggregate numbers mask meaningful sector variation that matters for workforce planning. Payroll gains in July were concentrated in retail trade, accommodation and food services, professional, scientific and technical services, and real estate.
Wholesale trade payrolls, by contrast, remain down 15,400 positions, or 1.9%, from an August 2024 peak, led by ongoing declines in machinery and building materials wholesalers.
That divergence suggests talent acquisition teams in consumer-facing and services sectors are likely to keep encountering more competitive hiring conditions than their counterparts in goods distribution, where headcount has been contracting for close to two years.
This unevenness also lines up with employer sentiment data. Despite the cooling wage picture, a survey found Canadian employers feeling more positive about hiring for the second half of 2026 than they were a year earlier — yet nearly half say they plan to hold headcount steady rather than expand, and finding qualified candidates remains employers' top cited challenge.
Read together with July's SEPH release, the picture for HR leaders is one of selective, not broad-based, hiring pressure: pockets of the labour market still justify competitive offers, while others give employers room to be more conservative.
With average weekly hours holding at 33.4 and vacancies essentially flat for seven months running, the July data gives little reason to expect a sharp reversal in either direction before year-end.
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