At the end of the third quarter of 2024 (July to September), Canada’s small businesses with 1-19 employees employed 5,322,500 people. That’s 82,800 fewer than at the end of the second quarter, a quarterly decline of 1.54%.

Over the longer-term the picture is more positive. Compared to Q3-2023, small business employment is up by 105,600 jobs, an annual increase of 2%. Similarly, the latest official statistics from Statistics Canada show small business employment has risen steadily since Q4-2023, from a low of 5,193,600 jobs.

By sector: small business employment declines in 8 sectors but increases in 5 sectors

Overall, small businesses employment declined in 8 sectors in Q3-2024 compared to Q2-2024, including the manufacturing sector (NAICS 31-33); the information, arts, and recreation sector (NAICS 51; 71); and the healthcare and social assistance sector (NAICS 62). Small business employment went up in the other 5 sectors, with the wholesale and retail sector (NAICS 41-42; 44-45) and the construction sector (NAICS 23) creating by far the most jobs. 

On an annual basis, however, small business employment is up in 10 sectors and down in only 3 sectors. This reflects the more positive longer-term trend noted earlier.

Small businesses in the wholesale and retail sector created 12,700 jobs in Q3-2024—more than any other sector. This marks the second consecutive quarter of growth, ending two consecutive quarters of declining employment (see chart below). The latest wholesale and retail data from Statistics Canada is currently only available through July 2024. This shows a 0.6% decline in wholesale sales but a 0.9% increase in retail sales. Subsequent reports will reveal if these trends continued through the rest of Q3-2024. If they did, small retailers may be responsible for more of the sector’s recent employment growth than small wholesalers.

Small businesses in the manufacturing sector had the largest decline in employment in Q3-2024, now employing 27,700 fewer people than in Q2-2024 (see table below). Notably, the quarterly decline of 10.11% is the fourth fastest recorded since 2015. Preliminary results from the latest Monthly Survey of Manufacturing by Statistics Canada, which covers large businesses as well as small businesses, shows total manufacturing sales decreased by 1.5% in August.

By region: Quebec has the largest quarterly decline, British Columbia has its fastest annual growth since 2015

All 5 regions of Canada that are currently tracked by the Small Business Index had declining quarterly small businesses employment in Q3-2024. Of these, Quebec had the largest quarterly decline, down by 53,100 jobs, as the chart below shows. The 4.89% quarterly decrease is the largest since Q1-2020, the beginning of the COVID-19 pandemic, when small business employment fell by 13.49% in the region.

On an annual basis, again the picture is more positive. Overall, 4 of the 5 regions had rising annual employment at small businesses in Q3-2024, reflecting the national trend noted earlier. Quebec is the only region without annual growth.

The brightest spot over the 12 months to the end of Q3-2024 was British Columbia. The region had its fastest annual growth since 2015, which is when the Index’s records begin. With annual growth of 10.30%, small business employment increased by 85,700 jobs (see table below). Further analysis indicates this is due to the region’s small businesses creating jobs much faster than their peers in the same sectors in other regions of Canada.¹ 

Expert Analysis by Professor Ufuk Akcigit

Ufuk Akcigit is the Arnold C. Harberger Professor of Economics at the University of Chicago. He leads the international team of economists working with Intuit QuickBooks on the Small Business Index.

“The global economy has experienced its fair share of turbulence following the COVID-19 pandemic, with inflation becoming one of the most pressing challenges for countries around the world. In both Canada and the United States, inflation surged post-pandemic, but the two economies faced different levels of pressure. While inflation was significant in both nations, the US contended with slightly more persistent and acute inflation than Canada.

“To combat rising prices, both countries resorted to interest rate hikes, which played a crucial role in curbing inflation. However, Canada had a somewhat smoother path. Unlike the US, Canada faced less wage pressure, allowing for a more measured approach to monetary policy. This difference was particularly important, as wage growth in the US contributed to more prolonged inflationary pressures, while Canada managed to keep inflationary forces somewhat in check.

“For small businesses—often considered the backbone of both economies—rising inflation posed a serious challenge. With higher costs of goods, services, and labour, many small businesses struggled to keep pace with the financial strain. In both Canada and the US, inflation became a top issue, squeezing margins and hindering growth.

“Despite these challenges, Canada has seen notable success in its fight against inflation. After a long battle, the country managed to bring its inflation rate down to 1.6%—lower than the U.S. rate, which sits at 2.4%. While both figures represent progress, Canada's slightly lower inflation rate suggests that its economy is gaining more stability, possibly due to the more tempered wage pressures and careful policy management.

“In addition to inflation, small business employment trends provide further insight into the state of the Canadian economy. For some time, small business employment in Canada remained below pre-pandemic levels, struggling to recover fully. However, there was a positive shift in Q2 of 2024, when small business employment exceeded pre-pandemic trends for the first time. This boost was followed by a slight dip in Q3 2024, with employment numbers declining by 1.5% following an unusual spike in the previous quarter. Despite this dip, employment levels were still 2% higher than in the same period last year, suggesting a gradual recovery.

“This longer-term employment recovery is encouraging for Canada's broader economic outlook. As small businesses regain their footing, they contribute to the dynamism that fuels economic growth. With inflation slowing and small business employment getting back on track, the Canadian economy appears to be regaining momentum.”

Note

1. This is based on an Analysis of Variance (ANOVA) test of the Intuit QuickBooks Small Business Index’s latest quarterly data to identify if regional trends by sector reflect national trends by sector. The result of this test can reveal one of two things:

• If regional employment trends do not reflect the national averages in each sector, the local increase or decrease in employment can be attributed to local influences such as regional investment or a natural disaster, to use an extreme example.
• Conversely, if regional trends do reflect the national averages in each sector, they can be attributed to these national trends, rather than local influences like the examples used above.