What if immigration was already falling?

From my perspective, the rental market indicates that population growth is already stalling.

So, I ran a poll on my twitter asking whether or not people believe that the Government of Canada can and will reduce population by 0.2%. The response from n=756 votes was overwhelmingly negative:

Here’s the thing… I actually think it could happen.

I don’t know if they’ll get to 0.2% reduction in population, but they’ll certainly slow the growth.

Actually, to be more clear, I think it’s already happening, and they’re capitalizing on an economic trend by timing this policy announcement to take credit for it. Smart move, really.

Here are a few examples why I feel that way:

• Rogers’ subscriber growth hit by slowdown in newcomers to Canada Subscribers who are new to Canada were down 40 per cent year-over-year
• Toronto rents hit three-year low
• Rent Growth in Canada Slows to 2%
• Foreign student enrolment down 45 per cent: Universities Canada
• India was processing 50-60% fewer student applications for Fall 2025

So, when it does show up in the data, it won’t be entirely because of this policy change. It will be because people already stopped arriving, or started leaving due to the mounting stress of:

• accumulated inflation/cost of living;
• bad economic prospects;
• rising unemployment; and
• declining standard of living.

So… I suppose they are welcome to take some credit for it in that regard as well.

The Bank of Canada actually called the government’s bluff in an earlier Monetary Policy Report earlier this year with a few key observations that indicated they likely didn’t think the government could hit the target. They modelled a GDP per capita recovery scenario in the April MPR based on previous (unmet) government projections.

Should the government be able to achieve some reduction in NPR based on their goals, this would be a reasonable potential outcome to expect.

They’ve also since been modelling population as a positive contributor to GDP growth moving forward, which were since revised, and they have now committed to reviewing growth projections based on this new information .

Today, we’re seeing a deviation from historic growth in GDP per capita comparable to what we saw in the 1990’s recession:

I think the 1990’s recession is important to look at as a comparable to today. This period was a brutal time for Canada’s economy, and it materialized in significant changes in the composition of population growth. The last time we saw an economic environment as severe as we’re seeing today, people simply left Canada, and stopped migrating to Canada. But it’s important to note the setup that preceded this change, because it’s eerily similar to today:

1. In 1989, we saw a huge run-up in population growth, hitting a record of 1.8% that was broken for the first time in 2023. I warned at that time in 2023 that this would be the outcome.
2. After the peak, we saw a big drop in annual population growth, which I think we’re likely seeing today. This will be reflected in the data soon, which is why the government timed their policy this way.
3. After the steep drop, population growth remained on a general downtrend for the better part of a decade, and only started picking back up when Canada’s economy was in recovery.
4. During this time, the housing market dropped from 1989 to 1994, and took until 2002 to regain its nominal peak (2012 when adjusted for inflation).

During the same period of time, rental inflation dropped from about 3% to just above 1%, and trended downwards for the same period that population growth did.

This is similar to the slump we’re seeing today, if you’re looking at rentals.ca data rather than Bank of Canada’s shelter inflation:

So, what should we expect to happen? As participants in the real estate industry, we’ve heard no shortage of bullishness coming from our profession that “population growth” would be the unbreakable bull case for Canadian real estate.

I think the government hitting their target of a 0.2% reduction in population is likely the lowest-likelihood outcome of this whole thing.

Here are the potential outcomes and paths policy imagines an individual NPR could take in this regard:

1. They leave Canada; or
2. They don’t leave Canada.

But… an important alternative is not discussed, and I think it’s a key factor.

1. They don’t leave Canada, but they say they did.

In this scenario, they say they’ve left Canada, but remain in Canada. This means they leave as a data point in Canada’s population, but stay in Canada as a contributor to the economy or a consumer. If this sounds ridiculous to you, don’t forget that the Government of Canada may have undercounted the NPR population by 1 million residents in the past.

To be honest, I actually think they’re counting on option 3 being a bigger portion than most people think.

Canada’s economy is often compared to the US, especially when looking at GDP per capita growth to illustrate how much our economy lags our neighbours to the south;

Source: CBC, OECD

But Canada really doesn’t look that horrible when you compare us to the OECD average:

If you readjust Canada’s GDP per capita assuming we are able to return to the long-term growth trend of our population, things don’t really look so severe at all:

According to Pew research centre: Unauthorized immigrants represent about 4.8% of the U.S. workforce in 2022. This was below the peak of 5.4% in 2007. Since 2003, unauthorized immigrants have made up 4.4% to 5.4% of all U.S. workers, a relatively narrow range. Unauthorized immigration has been growing since the beginning of the pandemic, when US GDP per capita started substantially outgrowing Canada’s GDP per capita.

This yields a roughly 3.7% reduction in GDP per capita, from $75,300 to $72,500. While this is a small percentage change, it can create a meaningful difference in interpretations of economic output, especially when comparing across nations.

Undocumented workers often pay taxes indirectly through consumption (sales tax, property taxes via rent) but typically don’t immediately access social benefits (e.g., healthcare, pensions). This can lead to an increase in GDP without a proportional increase in public spending, boosting per capita metrics.

Frankly, it is arguable that undocumented labor has become an informal yet crucial part of the economic infrastructure in the U.S. and many Western economies, providing essential workforce support in sectors that struggle to find local, documented labor at affordable costs. Many European countries, like Italy, Germany, and Spain, experience significant levels of undocumented immigration, which has been largely accommodated within their economies.

So, it would not surprise me if a conversion to undocumented labour was a planned outcome for a portion of this population.

Trudeau’s 2014 Op-Ed

This isn't a new conversation to Justin Trudeau. Let’s also not forget that Trudeau put together an op-ed criticizing the government ‘s temporary foreign worker program in 2014 , that stated it had negative pressure on wages for domestic workers.

This disagrees with Nobel-Prize-Winning Canadian-American labour economist David Card’s 1990 study “The Impact of the Mariel Boatlift on the Miami Labor Market ”, which examined the effect of a large influx of Cuban immigrants on Miami's labor market in 1980. This "natural experiment" allowed Card to analyze how a sudden 7% increase in Miami's labor force—mostly among unskilled workers—affected wages and employment.

Surprisingly, Card found that the Mariel Boatlift had virtually no negative impact on the wages or employment rates of less-skilled workers in Miami, including previously settled Cubans. Card suggested that Miami's labor market could absorb the newcomers due to factors such as a local economy structured around industries that heavily employed low-skilled workers (like textiles, apparel, and hospitality). Additionally, Miami’s previous experience with Cuban immigration and its large Spanish-speaking population may have eased the economic integration of the Mariel immigrants.

Card's findings challenged the assumption that rapid population growth, especially among unskilled labor, automatically depresses wages, providing a key case study in immigration economics and labor market flexibility.

So, either Trudeau doesn’t know this, he disagrees with it, or the labour market isn’t their incentive to do something about it, despite his previous comments.

While I commend them for acknowledging the problem they’ve created and kind of being accountable, but also blaming it on corporations and provinces, with statements like:

"Far too many corporations have chosen to abuse our temporary measures, exploiting foreign workers while refusing to hire Canadians for a fair wage,"

"All while under the watch of provinces, some colleges and universities are bringing in more international students than communities can accommodate, treating them as an expendable means to line their own pockets. That's unacceptable, and it needs to change."

“we didn’t get the balance quite right”

But the truth is, I think it is already happening naturally based on housing demand, and they’ve timed this announcement conveniently to take credit for it. The Liberals are actually trying to win an election next year. I thought they’d capitulated given the polls and were planning to leave a mess for the conservatives in 2025. So, I have to give them credit for trying here. I guess Carney has really given them a renewed energy. This is perhaps the most notable announcement of policy since his joining.

Regardless of whether my assumption around their motives is correct here - a falling population will give the liberals a growing GDP per capita from now until the election, which they could really use right now, given how easy they are to criticize economically.

At the same time, the demographic decline could put Canada into a real recession, though it could also mask unemployment impact by shrinking the labour force.

These are a lot of variables to balance heading into an election.

Further reading:

“Trudeau announces massive drop in immigration targets as Liberals make major pivot”