Research Briefing | Nov 27, 2023

Canada’s population boom will lift the economy, but only over time

Our new demographic projection suggests rapid international migration will boost Canada’s population to 42mn by 2025, which would be a record 3mn (8%) increase from 2022. The surge in population has important implications for the economy, which we will incorporate in our December economic forecast.

What you will learn:

  • A larger population provides a greater supply of labour and higher potential output. But we think an increase in actual economic activity will likely occur gradually as newcomers fully settle. We still expect a moderate recession in Canada that will last through early 2024, so reduced hiring will likely further delay the full economic benefits of the migrant influx.
  • The population surge is already helping loosen the labour market, and we expect this will continue. Monthly job gains since May have been outpaced by strong migration-led labour supply growth, lifting the unemployment rate from 5% to 5.7% in October, its highest level since January 2022. A widening gap between a fast-growing labour supply and weaker hiring during the deepening recession will drive the unemployment rate even higher in the coming year.
  • Greater slack in the economy due to a larger labour supply lessens inflationary pressures and the likelihood of further monetary policy tightening by the Bank of Canada. Still, the migration-led population surge is adding strain to Canada’s chronic low housing supply, especially for rentals, and public infrastructure and services like education, health, and social services.
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