Canada’s temporary residents canada shift is colliding with softer economic readings, and Don Drummond says policymakers risk reading that weakness the wrong way. The C.D. Howe Institute paper he co-wrote with Parisa Mahboubi says the country is eking out growth even as its population declines.
The economists forecast GDP growth of 0.4 per cent this year and 0.5 per cent in 2027. They also say the labour market will shed tens of thousands of jobs over this year and 2027, while adding that “these are not signs of a struggling economy.”
Drummond and Mahboubi
Drummond and Mahboubi wrote that the numbers reflect a country adjusting to a U-turn in immigration policy after years of rapid population gains. They said, “They are what a normally operating labour market delivers, given the demographic shifts underway.”
From 2022 to 2024, Canada’s population grew at staggering rates, and the rapid influx of temporary residents, including workers and students, fueled much of that growth. During the same three-year span, the labour market added 33,000 positions a month.
Canada Population 2025
The picture changed in 2025, when Canada’s population fell by more than 100,000, the first annual decline in the country’s history. The federal government slammed the brakes on certain pathways of migration in response to criticism of the immigration boom.
The paper says those shifts help explain why recent labour and output readings may look weaker than the economy itself. Its projections are weaker than those recently forecast by the federal government and the Bank of Canada, and it says growth will pick up in 2028 and beyond.
For policymakers, the immediate issue is whether weak data should trigger stimulus. Drummond and Mahboubi warn that if they respond by slashing interest rates to stoke demand, inflation could reignite, so the next move will test whether they treat the slowdown as a demand problem or a demographic one.
