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Population Declines Reshaping Canada's Labor, Housing Market, National Bank Says

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Estimates from Q1 confirm that Canada's population declined for a third consecutive quarter, which National Bank of Canada said is an "unprecedented development that underscores the impact of the government's shift in immigration policy."

Canada shifted to reduce the share of non-permanent residents, or NPRs, to below 5% of the population, "a level broadly consistent with conditions that prevailed before 2023," the bank said in a note Wednesday.

Data from Statistics Canada show that's on track, National Bank said. "The share of NPRs has already fallen significantly from its 2024 peak and, if the current pace is maintained, could fall below the government's target before the end of 2027," Deputy Chief Economist Matthieu Arseneau and Senior Economist Daren King said in the note.

Demand pressure on housing has eased with rents declining and home prices falling across much of the country, the economists said. Unemployment among non-permanent residents has also improved, they added.

Still, changes in immigration policy come with costs, National Bank said. "Beyond the human consequences for some individuals required to leave the country, rapid population expansions followed by abrupt contractions complicate hiring decisions, business planning and activity in some economic sectors."

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