‘It’s in the moments like these that we can transform the nation by creating conditions that will outlast the current crisis and pay off in the long term’
Small business confidence in Canada fell sharply in May, signalling weaker hiring, tighter wage budgets and more cautious workforce planning for HR professionals, according to new data from the Canadian Federation of Independent Business (CFIB).
CFIB’s Monthly Business Barometer long‑term index – which measures 12‑month expectations for business performance – declined by 11.7 points to 46.3 in May. The short‑term index – based on a three‑month outlook – also weakened, falling about seven points to 47.9.
Measured on a scale from 0 to 100, index readings below 50 indicate that more business owners expect their performance to worsen than to improve over the period.
Confidence falls below neutral across provinces and sectors
CFIB reported that every province and every sector saw confidence decline in May. The four largest provincial economies are grouped around the 50‑point mark, while Saskatchewan and New Brunswick small businesses are “particularly less confident,” with optimism below 50 over both the long and short term.
By industry, long‑term confidence decreased across the board, with retail, hospitality, and health and education among the sectors seeing the largest drops. Businesses in hospitality and agriculture are the least optimistic for both the next year and the next three to four months, with index levels in the 40s.
“Many small firms are stuck in a grind. Demand is weak, costs − especially fuel − are high and conditions don’t show signs of improving. This environment is not conducive to strong orders or investment,” said Andreea Bourgeois, CFIB director of economics.
Hiring and wage plans under pressure
Hiring intentions weakened notably in May, a key signal for HR leaders watching staffing pipelines and talent strategies. CFIB said full‑time staffing plans “remain weak, with a higher share of employers planning to lay off staff (16%) than to hire (14%). This marks the first month of 2026 with negative net staffing intentions, following several months of a net positive balance.”
The federation said hiring plans are also below typical seasonal levels, suggesting employers are more hesitant to add staff heading into the summer.
Average wage plans were unchanged in May at 2.4 per cent, while businesses plan to raise prices by an average of 3.1 per cent over the next few months. CFIB noted that the average planned price increase “remained elevated above 3% in May, marking the second month in a row at such high levels,” creating a potential squeeze on employees’ real incomes.
Canada’s economy avoided recession in 2025 and continues to generate jobs at a faster per‑capita pace than the United States, according to the federal government’s Spring Economic Update 2026.
Cost pressures, weak demand and calls for policy action
Insufficient demand remains the top limitation on business and production expansion, cited by 53 per cent of small and medium‑sized enterprises, which CFIB says is about 15 percentage points above its historical average and worsening compared to recent months.
Cost‑related pressures are also weighing heavily on growth prospects. Fuel costs are the most frequently cited constraint, affecting 72 per cent of small firms. They are followed by tax and regulatory expenses (64 per cent), insurance costs (60 per cent) and wage costs (60 per cent), alongside significant pressures from product input, raw material, capital and technology costs.
“While our governments don’t have control over global events, they can control what’s happening here at home,” said Simon Gaudreault, CFIB chief economist and vice‑president of research. “It’s important governments leverage domestic policies to boost our economy. Lowering taxes, reducing red tape and eliminating internal trade barriers are some of the ways to help small businesses weather the current challenges.”
He added: “It’s in the moments like these that we can transform the nation by creating conditions that will outlast the current crisis and pay off in the long term.”
CEO confidence in global revenue growth has dropped to its lowest level in five years, with artificial intelligence (AI), cyber risk and geopolitical pressures forcing employers to rethink workforce and capability strategies, according to a PwC report released in January.
