The economy, AI efficiency vs. human judgment, and Canadian pride.

About this edition

Illuminating possibilities.

Welcome to the second edition of the SMB Pulse: the weekly newsletter for small to mid-size business leaders who seek news, updates, and insights for the Canadian business landscape. As we move into the new year, business leaders find themselves in a dilemma: we are seeing more automation than ever before, yet a renewed loyalty to the human and local.

Our goal for this newsletter is to help you leverage updates and insights into quantifiable competitive advantages. This week, we look under the sheets for the state of the economy, the new ethics of AI in recruitment, and the nationwide shift in consumer sentiment.

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State of the economy

How our economy is shaping SMBs.

While 2025 was rocked by trade uncertainty, 2026 is shaping up as a year of cautious resilience. A recession isn’t currently projected by experts, but we are entering a period of slow growth with real GDP growth capped at roughly 1.0%. Combined with the Bank of Canada holding interest rates at a neutral 2.25%, the emergency phase of the post-pandemic era has fully come to an end, replaced now by an environment focused on internal productivity.

Some insights for small to mid-size businesses include:

The pillar of growth: Domestic household spending remains our primary engine, accounting for 60% of national GDP. This doesn’t mean much in the bigger picture: consumer debt is at record highs, and population growth is slowing, meaning demand will be defined by an essentials-only policy for many Canadians. Consumers are refocusing their loyalty toward Canadian business that can balance the #ElbowsUp movement, with competitive pricing.

The productivity gap: Prime Minister Mark Carney’s cancellation of the capital gains hike in March of last year was a win for capital investment and business innovation, but Canada still faces a structural productivity problem. In 2026, SMBs will need to learn and adapt by absorbing rising input costs without losing price competitiveness.

One method that Canadian companies are achieving this is by leveraging AI tools to automate workflows and ultimately, empower their employees. AI can be a game changer in streamlining redundant processes and increasing productivity, resulting in price competitiveness in the modern day and age. 

What to focus on: The country expects unemployment to hover around 6.8%, creating a labour market favourable for companies for the first time in years. In other words, it’s a great time to upgrade your talent pool if you’re looking to expand your business.

We’re also suggesting that you focus on protecting your profit margin, refining operational efficiency, and targeting investments in technology (such as AI) that improve your processes and agility, rather than your business’s footprint.

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Ontario’s new AI mandate

AI efficiency vs. human judgment.

The Working for Workers Four Act of Ontario’s Employment Standards Act has officially changed the recruitment playbook for employers with 25 or more employees. As of this month, they must disclose in their job posting when AI is being used to screen or select candidates. But beyond the legal obligations lies some food for thought: is AI efficiency hurting your results?

AI excels at finding the perfect candidate on paper, or the one with the exact degree and the five years of experience your new role requires. Despite this, in its current iteration, AI struggles to identify the outliers. It can miss the candidate who may lack the credentials the role seeks but who possesses the exact mindset, skill set, and alignment your team needs.

As a leader, you have a responsibility to ensure AI isn’t a means to an end. We urge you to ask yourself: when seeking efficiency from our processes, are we negatively impacting the quality of the outcome? If an algorithm is assessing your resumes, might it filter out your next top performer simply because they had a non-traditional career path or didn’t use the right keywords?

Human judgment remains the only tool capable of sensing leadership potential, EQ, and shared values. We recommend using AI to handle the data-intensive administrative burden (such as scheduling and information gathering), while reserving the assessment of a candidate’s character for your talent acquisition department.

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US tariffs: the good and the bad

Nationwide pride is still at an all-time high.

US-Canada trade tensions continue to rise, and economic nationalism along with it. Tariffs on items like steel, aluminum, and upholstered furniture (reaching upwards of 50%) have raised the cost of imported goods by a wide margin, pushing Canadians to look closer to home.

The data: Recent data from Angus Reid Group reveals that 78% of Canadians say they are deliberately buying more Canadian-made goods, with a study from Research Co. & Ipsos adding that 82% of Canadians would continue to prioritize Canadian products even if trade tensions eased.

In a high-debt environment, patriotism has become pragmatic; consumers are rallying behind Canadian brands, but without a caveat: they’re gravitating toward the ones that can prove their value through competitive pricing.

Protect your supply chain: For the small and mid-sized business, sourcing locally is no longer only about marketing, but also about survival. Diversification is key, as having both domestic and international suppliers will insulate your margins from a sudden tariff shock that could otherwise wipe out your annual profit in a single quarter.

Tips from Spraggs Group: Aside from protecting your bottom line, proving to your customers that your product or service is 100% Canadian-sourced or Canadian-built could make for a powerful headline for your marketing department. The home-field advantage is one of the most influential brand assets for businesses in 2026.