2025 Spring Update – Trump, Tariffs and Terminations

Who would have thought a reality TV star could have so much impact on the Canadian labour market? The impact caused by the returning President is a fear factor (pun intended for those old enough to remember the show!) that is creating a wave of uncertainty in businesses globally, but crucially here in Canada. As a small business owner myself, watching the news break and managing the emotions of the flip-flopping approach to trade is beyond frustrating. We are already seeing the impact on decision-making, as both our clients consider key hires and, more often, senior leaders decline the opportunity to make changes in these uncertain times. There is no doubt that businesses will be impacted, regardless of Canada’s response, and once again, employees will bear the brunt of the impact on wage growth, employment security, and career progression prospects.

The election being resolved is one bright side, and regardless of your political affiliation, having some certainty in our economic direction will be a welcome solace for business owners trying to plan for the future. In addition, it is clear that we will see a trimming of our public service, shifts in public spending, and measures to help stave off a deep recession as we rebalance our international trade. As an Ottawa business, we are seeing higher-than-normal unemployment levels. Any reduction in Federal headcount will have a material impact on our City. On the one hand, the professional services that count the Crown as a core customer will see a reduction in demand; on the other hand, the introduction of those former government workers will be difficult to absorb. A typical Federal employee enjoys a 35-hour work week, strong benefits, above-average compensation and a hybrid work model. Those are not the work conditions that will greet them when they start looking for work. In an employer’s job market with a high supply of talent, the adjustments they need to make will have wide-reaching implications for them and their families. Ottawa’s labour market is simply not in a place where the stereotypical public sector values to work-life balance will be accepted, leading to some tough times ahead for those who enter the jobseeker pool in the next 6-9 months.

What we are watching

Retirements – All levels of government are already facing significant succession planning challenges due to their structured pension programs. The story seems to be different for our private sector clients, where many of our recent searches have been focused on the strategic replacement of retiring senior leaders. 

What has become evident is the disconnect between the expectations of many organizations regarding the next generation of executives and the reality of what the current labour market can provide. The knowledge gap between the incumbent and the next leader is bigger than most have assumed and more impactful than most can manage. This is largely down to prior cash constraints and the inability to invest in learning and development in the last few years. 

The fact is, many executives have been leading to solve immediate and critical problems, rather than having the luxury of planning for the future and creating sustainable succession plans. This has led to many external hiring processes being undertaken to find the necessary experience, which is also having a knock-on effect on existing managers becoming disengaged as they are overlooked for promotions for which they would naturally be in line.

Four days a week in the office

No doubt drawing condemnation from the remote and hybrid worker crowd, more of our private sector clients are planning for 4 days in the office. If you work at an organization where you are expected to work 3 days a week, be prepared for the conversation about working 4 days a week to arise. About 80% of our searches require people to be in at least 3 days a week, and the vast majority of our clients are asking for our opinion on 4 days vs. 3 days. While you can find every article, opinion, and rationale for hybrid or remote, employers want their people in the office, and in this economy, they will get their way.

It’s becoming increasingly clear that more private sector organizations are shifting toward requiring employees to be in the office four days out of five each week—a move that’s sure to spark debate among remote and hybrid workers. 

Clocking-in and out times are not being enforced in many places, with most employers wanting some face time with their teams 3-4 days a week. However, we anticipate that enforcement of work hours will be the next thing to start showing up. Canada is unproductive, facing a huge external force, and needs to shift its work culture to ensure it is positioned to be competitive in new markets with new trading partners. That will filter down to businesses, to leaders, and to the expectations placed on employees. Be prepared, a seismic shift is coming, and you will be asked to do more, more often, and in ways that the employer prefers.

Buy local, buy Canadian

As a professional services firm in a city and province dominated by multinationals with a heavy US bias, I am both excited and intrigued by the domestic interest we are seeing. Will a US-based firm with regional offices in Ottawa start to experience a decline in demand? What will they do with pricing and service levels? Will incentivizing clients to stay with them, or offering significant discounts, divert the well-intentioned desire to buy local? I think local and Canadian-owned businesses will see a spike in opportunities, but likely at the expense of margin, as new clients push for a deal in exchange for choosing to go local.

Performance expectations for employees 

When the economy is tough on businesses, employees’ expectations rise. As a business owner, you are hyper-focused on cost management, productivity, and safeguarding the organization’s future. It is natural to start seeing the challenges or issues caused when employers ask more of their employees. Often, it is subconscious and not ill-intentioned, but it happens, and it leads to changes. 

It is critically important for both employers and employees to be proactive in performance management. Setting goals, managing expectations, seeking coaching and counsel to help navigate unexpected roadblocks will be critical. It is likely that compensation reviews will be met by employers with less generosity, which in turn can impact engagement. Currently, it is time for HR leaders in organizations to take the lead and collaborate with both managers and staff on setting clear expectations, monitoring employee engagement, and holding executives accountable for their commitments to company culture.

Our outlook 

The balance of 2025 will be yet another period of unpredictability; perhaps we should just accept that this is the way it will always be? Business owners will remain cautious as they await a clearer signal on Canada’s longer-term economic health. Unemployment will rise, and wage growth will be stifled, all while the cost of living goes up. Here in Ottawa, we can expect to see turmoil in the local labour market, with significantly differing work values between job seekers and employers. There will be a few winners, as is often the case in a recession, and we expect certain sectors to perform very well in the upcoming year. Defence, domestic manufacturing, natural resources, and infrastructure could all see massive increases in investment as Canada repositions itself for its new international trade reality.