People wait in the arrivals area at Toronto Pearson International Airport. As of Oct. 1, there were roughly 2.5 million temporary residents in Canada, an increase of more than 310,000 in just three months, according to Statistics Canada figures.Fred Lum/the Globe and Mail
Canada is caught in a “population trap” and needs to rein in immigration significantly to escape it, according to a Monday report from National Bank of Canada economists, part of an emerging consensus that explosive growth is exacerbating some of the country’s economic troubles.
In the report, economists Stéfane Marion and Alexandra Ducharme say “staggering” population growth is stretching the country’s capacity to absorb new arrivals. They add that the main example of this strain is in the housing market, where construction has lagged behind demand from newcomers.
The National Bank economists argue that annual population growth should not exceed 300,000 to 500,000.
That would be a dramatic reduction from current levels. Over the 12 months to Oct. 1, Canada’s population rose by 1.25 million, or 3.2 per cent, the quickest pace of growth since the late 1950s. Almost the entirety of the population increase was driven by international migration, and most of that was from temporary residents, such as students and workers.
“Canada is caught in a population trap that has historically been the preserve of emerging economies,” the report says. “We currently lack the infrastructure and capital stock in this country to adequately absorb current population growth and improve our standard of living.”
The federal government’s expansionary immigration policies have increasingly come under fire. While Ottawa sets targets for the annual intake of permanent residents – the figure for this year is 485,000 – there are effectively no limits on the arrivals of temporary residents. Ottawa has argued that higher immigration is needed to address labour shortages, and to slow the aging of Canada’s population.
At an Economic Club of Canada event in Toronto last week, chief economists at Canada’s major banks were roundly critical of how the government is managing the immigration file.
“I’m a bit surprised that the government is moving fairly slowly on this,” Avery Shenfeld, the chief economist at CIBC Capital Markets, told the audience at the event. “I think there’s some urgency to bring these numbers of students and temporary workers into better balance with the arithmetic of our home-building strategy. … The numbers just don’t add up.”
The federal government has said it could start to limit the number of temporary residents this year, perhaps by setting a cap on visa approvals. As of Oct. 1, there were roughly 2.5 million temporary residents in Canada, an increase of more than 310,000 in just three months, according to figures from Statistics Canada.
But it appears that Ottawa did not heed warnings about the potential impact of its immigration policies. The Canadian Press reported last week that federal public servants told the government in 2022 that rapid increases in population could put pressure on access to health care and affordable housing.
Surveys show that public support for immigration is fading, as Canadians link home affordability concerns to the influx of newcomers. Statscan’s inflation report shows that rents are growing at historically strong rates, while housing prices remain elevated despite a lull in activity in the home resale market driven by higher interest rates.
The national benchmark home price was about $710,000 in December, effectively unchanged from a year earlier, according to figures the Canadian Real Estate Association released on Monday.
In their report, the National Bank economists say a population trap is a situation in which living standards are unable to improve, because the population is growing so quickly that all savings are needed to maintain the capital-to-labour ratio. Capital includes a variety of things – such as property, equipment and software – that are used for the production of goods and services.
In Canada, the capital stock per worker lags well behind that of the United States. Moribund levels of business investment and weak productivity growth are perennial themes of debate in the Canadian economy, predating the recent surge of newcomers to the country.
Even so, many commentators say the issue has reached a crisis point. Real gross domestic product per capita – a popular measure of living standards – is no higher today than it was in 2017, pointing to years of economic stasis.
Bank of Nova Scotia chief economist Jean-François Perrault said last week that policy makers had perhaps made it “too easy” to hire foreign workers. “We’re making it cheaper to bring people in, rather than investing,” he told the Economic Club of Canada event.
Citing a labour shortage, the federal government has taken several steps over the past two years to increase employers’ access to foreign workers. For example, it temporarily scrapped a limit on work hours for international students who are employed off-campus. It also expanded the Temporary Foreign Worker Program, allowing companies to hire more workers from abroad at low wages.
The labour market has softened over the past year as higher interest rates have weighed on consumer spending and businesses’ hiring plans. The total number of job vacancies has fallen 37 per cent from a peak in 2022, while the unemployment rate has risen to 5.8 per cent, from a record low of 4.9 per cent.
At the event last week, Mr. Marion of National Bank said the Toronto area’s population is growing so much every month that inflation for rental housing units can’t be contained.
The federal government has “lost control on immigration policy,” he added.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
