Reversal of normal trend; small businesses shedding jobs in uncertain economy
Canada’s labour market is experiencing a striking divergence, according to recent data — large employers are driving job creation, while small businesses are cutting jobs. This trend, which has become more pronounced in recent months, is unfolding against a backdrop of heightened recession concerns and the federal government’s ambitious new slate of nation-building projects.
Recent analysis from BMO Capital Markets reveals that in 2025, large firms with more than 500 employees posted a net gain of 592,000 jobs, while small businesses — less than 500 employees — lost 300,000 jobs. This means nearly all net job creation is now coming from large employers, a reversal of Canada’s traditional reliance on small business — usually accounting for about 80 per cent of the job market — as the primary job engine in the country.
The Bank of Canada’s Market Participants Survey for the third quarter of 2025 underscores the fragility of the current environment. Financial leaders surveyed put the odds of Canada entering a recession within the next six months at about one in three (35 per cent). Notably, even the most optimistic respondents doubled their recession odds to 20 per cent, while the most pessimistic see a 50 per cent chance — essentially a coin flip. The risk is seen as immediate, not gradual, with trade tensions from US tariffs and weak consumer spending cited as top threats.
Why are large employers faring better?
BMO senior economist Sal Guatieri, in a note to clients, attributed the resilience of large employers to their greater ability to adjust to tariffs and policy uncertainty. Their scale allows them to absorb shocks, adapt supply chains, and access capital more easily than smaller competitors, he said, adding that the shift to large employers is being amplified by recent trade shocks and policy responses.
However, this concentration of job growth also creates new risks. If large employers face a downturn, the impact on employment could be abrupt and severe — small businesses are historically the first to hire in an economic recovery, so future rebounds could be slowed without their participation in adding jobs, said Guatieri.
On Nov. 13, 2025, Prime Minister Mark Carney announced a new round of “nation-building” projects, referring six major initiatives to the government’s Major Projects Office (MPO) for fast-tracked approval. These projects, combined with five in September, represent a combined $116 billion in investment and are designed to deliver a jolt to the tariff-hit economy and help Canada become more economically self-sufficient.
These projects are expected to create thousands of jobs, support Indigenous economic participation, and boost Canada’s standing as an energy and critical minerals supplier, according to the federal government. The MPO will help streamline environmental assessments, coordinate Indigenous consultations, and attract investment.
A boost for smaller companies?
Public investment in infrastructure tends to have broad spillover effects, creating opportunities for smaller firms as suppliers and contractors — the CEO of Canada Nickel, Mark Selby, told CBC News that the government’s referral of his company for one of the projects, a new mine in Timmins, Ont., “puts us in the fast lane.”
Large employers are driving job creation, but recession risks loom and small businesses are struggling. “If large employers don’t keep “punching above their weight — or smaller companies ramp up hiring — overall job growth could weaken,” said Guatieri.
