Analysis on business dynamics 'paints a troubling picture,' says CFIB
Canada’s private sector is heading into 2026 with a persistently tight labour market and modest economic growth, according to a quarterly survey from the Canadian Federation of Independent Business (CFIB).
The private sector job vacancy rate held at 2.8 per cent in the fourth quarter of 2025, representing about 387,600 unfilled positions. Payroll employment increased by 1.0 per cent in Q4, bringing total employment growth for 2025 to 0.4 per cent, and employment growth is forecast to accelerate to 2.6 per cent in the first quarter of 2026, it said.
For HR professionals, sustained vacancy levels and rising employment growth mean continued pressure on recruitment, retention and workforce planning as organisations try to fill key roles without overloading existing teams.
Growth outlook and inflation
The report also estimates that Canada’s economy grew by 0.6 per cent in the fourth quarter of 2025 and is forecast to expand by 3.4 per cent in the first quarter of 2026. Overall GDP growth for 2025 is put at 1.7 per cent, slightly above the 1.6 per cent recorded in 2024.
Inflation is expected to remain close to the Bank of Canada’s target. The Consumer Price Index (CPI) rose to 2.2 per cent year‑over‑year in Q4 2025 and is projected to edge up to 2.3 per cent in Q1 2026, while core inflation, excluding food and energy, held at 2.5 per cent in Q4 and is expected to ease to 2.3 per cent early this year. CFIB notes that with total inflation near target, “monetary policy has achieved its objective,” although inflation remains sensitive to global shocks.
CFIB’s special analysis of business‑to‑business (B2B) and business‑to‑consumer (B2C) firms shows that “all firms have become much less optimistic since Q1 2025,” but B2C businesses have recovered more quickly. Weak demand, shortages of skilled labour and distribution constraints are affecting B2B firms more, while limited physical space is a bigger constraint for B2C firms.
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Meanwhile, CFIB’s sectoral analysis finds that “business exits have outnumbered entries for more than one year now,” with most sectors experiencing more closures than start‑ups. The imbalance is particularly pronounced in transportation, wholesale, and finance and insurance. Only a few sectors, such as hospitality and professional services, have seen consistently positive ratios recently, and “only the health and education sector is bucking the current negative trend.”
“Our analysis on business dynamics paints a troubling picture,” says Simon Gaudreault, CFIB’s chief economist and vice‑president of research. “Canada’s economic pulse depends on a healthy private sector. We can’t keep losing businesses without new ones entering the market. This is a wake‑up call for policymakers to create a stronger and more competitive economic environment.”
On investment, CFIB says private investment grew by 0.7 per cent in Q4 2025 but was still down 1.2 per cent year‑over‑year, with a 3.5 per cent recovery expected in Q1 2026. “Private investment declined by 1.2% year on year, and it’s encouraging to see it slightly rebounding,” Gaudreault says. “Small businesses are adapting to the new trade reality. If uncertainty eases, private investment would recover even further, but we need bold policy changes. That includes reducing taxes and red tape and removing internal trade barriers.”
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Consumer‑facing sectors: short‑term slump, rapid rebound
The CFIB report also notes that retail sales fell by 1.7 per cent in nominal terms in Q4 2025, the first contraction after several quarters of slowing growth, with year‑over‑year retail growth down to 1.0 per cent. Retail sales are expected to rebound by 4.6 per cent in Q1 2026, with nominal retail sales growth averaging 3.8 per cent in 2025, ahead of 2024.
Overall, CFIB concludes that “despite a turbulent 2025, Canada’s economy remains relatively resilient,” but warns that long‑term performance will depend on a stronger environment for private enterprise.
For HR professionals, that translates into a 2026 marked by sustained labour shortages, targeted growth and ongoing uncertainty—conditions in which people strategy will be a primary lever of competitiveness.
