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What is next for Canada and Immigration

Paul Young

Experience Senior Financial Planning, Analysis and Reporting SME seeking P/T or F/T job.

发布日期: 2024年10月25日

Excellent work by 满地可银行 https://economics.bmo.com/en/publications/detail/fb3ff12e-3054-4c6b-befb-fe9d2fac77af/

Ottawa released its annual Immigration Levels Plan, with some significant changes that will curb net inflows in the coming years. To say that immigration has become one of the most significant economic issues in Canada would be an understatement; in fact, it might be right at the top given the large and widespread impacts. Here are some of the details and implications:

Permanent Immigration Targets Reduced

Annual permanent resident (PR) targets will be cut to 395k in 2025, slowing further to 365k by 2027. That’s down from an expected 485k this year, and a meaningful shift down from previously-planned levels of 500k per year going forward.

In terms of composition, cuts will be seen across the board, including economic immigrants under the Federal High Skilled program and Provincial Nominee Programs; as well as refugees and those under family programs.

Effectively this means that permanent immigration will go from adding 1.2 ppts per year to population growth to a cooler 0.9 ppts in the years ahead. While that seems like a modest trim, it’s symbolic, and makes hitting the temporary resident (TR) targets even tougher.

Temporary Resident Caps—The Crux of the Issue

For the first time, Ottawa is putting temporary resident targets in the official Immigration Levels Plan. This plan aims to reduce the share of TRs to 5% of the population by 2026 from just over 7% today. This is where the really significant impact lands as it implies net TR outflows of roughly 445k per year over the next two years. Ottawa has already announced reductions in international student intake levels. As well, restrictions on Temporary Foreign Worker hiring have been put in place in recent months. Priority will be placed on agricultural workers, and seasonal workers will not be impacted. TR inflows have been proportionally largest in Ontario and B.C.

Hitting these targets might prove to be a challenge, but it implies that overall Canadian population growth will run at about zero for the next two years. That would be a dramatic shift from above 3% today. TRs have accounted for the bulk of the explosion in the population, adding almost 2 ppts to Canadian population growth in the past year, or about 800k people.

Wide Ranging Implications

The biggest implication is that it will take stress off the economy and infrastructure that has become almost debilitating in recent years—think housing, services and infrastructure. The Bank of Canada views immigration as neutral for inflation over time. The latest Monetary Policy Report assumed population growth would slow to 1.5% through their projection horizon, so there is downside risk to that view if Ottawa carries out these targets.

While this move will dampen demand, all else equal—think spending in retail, food and telecom services—we need to dispel the narrative that slower population growth will be bad for the economy. Real GDP per capita has been stagnant on balance since 2016 while that in the U.S. has expanded by 16%. And, since 2022Q2, Canada’s per-capita output has fallen outright in seven of eight quarters. One can argue that the surge in TRs has diverted resources to housing, and allowed firms to lean on low-cost labour, at the expense of productivity.

In the job market, slack is building as job creation can't keep up with labour supply growth. Consider that the 1.7 ppt increase in the unemployment rate since mid-2022 has been driven entirely by higher labour supply, while youth (15-24) unemployment surged above 14%. Newly-landed immigrants are themselves finding a tough job market, with unemployment in that cohort above 10%. While there are still pockets of skilled labour shortages within the Canadian economy (e.g., trades and health care), TR inflows are not adding much to that labour supply—in fact they are creating more demand. These changes should gradually take some slack out of the job market through slower labour supply growth.

For housing, this move will dampen price pressures and rents, all else equal (e.g., rate cuts and mortgage rules). That said, the sudden shift in TR inflows should clearly soften the rental market just as a torrent of supply is coming online in some regions (e.g., Toronto condos). Growth in average asking rent across Canada has slowed to just 2% y/y according to Rentals.ca , with outright declines seen in some markets. We’ve long argued that Canada has a housing demand problem. This policy change will be felt quickly, and will make other supply-side measures look almost like rounding error.

Let me expand on the following:

I have authored many articles on immigration over the past years. Here is my work from 2018 - https://www.slideshare.net/slideshow/immigration-to-canada-system-in-crisis/126513511

Immigration should be tied to economic growth.

Why not move immigration back to 300K per year? That was the level under Harper.

There is job quality issue in Canada that Trudeau never mentioned with any of his posts.? Blog – Labor and Employment – Canada – September 2024? - https://www.dhirubhai.net/pulse/employment-labor-market-canada-september-2024-paul-young-jipjc/

Job vacancies continue to decrease - https://www150.statcan.gc.ca/n1/daily-quotidien/240926/dq240926a-eng.htm

Local and provincial governments are battle fiscal gap (taxation and spending issue) - Blog – Public Sector – Local Government – Canada – Fiscal and Financial Management - https://www.dhirubhai.net/pulse/local-government-canada-august-2024-paul-young-wd0uc/

There are? housing supply issues that need to be addressed - Housing and RBC - https://www.dhirubhai.net/feed/update/urn:li:activity:7254835244866887681?commentUrn=urn%3Ali%3Acomment%3A%28activity%3A7254835244866887681%2C7254914058754117632%29&dashCommentUrn=urn%3Ali%3Afsd_comment%3A%287254914058754117632%2Curn%3Ali%3Aactivity%3A7254835244866887681%29

The reality is the only reason this move is being done on immigration us due to Trudeau flailing in the polls.

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Paul is a former IBM Customer Success Manager who has deployed over 300 data and AI solutions across industries and geographies for the past 8 years. Paul is a Financial Planning, Analysis, and Reporting SME working with data including integration of macro and micro indicators as part of the integrated business planning and reporting cycle.

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