Canada: Skyrocketing Population Growth May Muddy the Monetary Policy Waters
- Canada’s population reached a record 39.9M on April 1, 2023, a 3.1% increase versus year-earlier levels. Headcount gains have been accelerating steadily since the end of 2021, and this latest advance was the fastest year-over-year rate of expansion since the 1950s (graph 1).
- Net non-permanent residents—which include international students and temporary foreign workers—anchored the last 12 months’ increase (graph 2). This category accounted for about 746k (61%) of the 1.21M rise in the national population since April 1 of last year.
- That gain outpaced a still very large 419k (35%) contribution from net international immigration during the 12 months to April 1, 2023.
- By province, the Maritimes and Alberta experienced the strongest population gains, with robust support from international and interprovincial migration. The Maritimes are in the midst of record year-over-year population advances, as are Manitoba and Saskatchewan despite significant net interprovincial outflows.
- Ontario continues to lose residents to other provinces at a record pace. In the 12 months to April 1, 2023, it experienced an all-time high net outflow of almost 55k to other provinces. Alberta has been the biggest beneficiary, but the Atlantic Provinces continue to welcome large numbers of former Ontarians (graph 3). Still, net interprovincial outflows from Ontario were much smaller than gains related to immigration and net non-permanent residents, resulting in the strongest population growth rate in the province since the early 1970s.
International migration continues to spur hefty and accelerating gains in Canada’s population. That should remain the case so long as federal policy continues to target newcomer attraction and retention, though temporary foreign worker admissions should fall if the economy slows. The Q1 2023 results were not unexpected, as we’ve highlighted record growth rates for the over-15 population in recent labour market commentaries. The Canadian economy continues to record very high job vacancy rates. Meanwhile, new immigrants are enjoying historically strong employment rates. We still suspect that strong Canadian employment gains despite sharply higher interest rates partly reflect immigrants and net non-permanent residents filling job openings accrued over the course of the pandemic.
While surging population growth and improving immigrant labour market integration are positive for Canada’s long-run economic prosperity, they come with two caveats. First, to the extent that they’re contributing to outsized employment growth, that could put upward pressure on consumer demand. That could make the Bank of Canada’s inflation control efforts more challenging. Second, we know that many Canadians are struggling with severely stretched housing affordability. Continued efforts to attract and retain skilled newcomers contribute to household formation rates, and therefore only reinforces the need to boost the housing supply.
Headcount contributions from international migration also matter at the provincial level. Record out-migration from Ontario speaks to the increasing draw of Alberta and Atlantic Canada, particularly for young Canadians. But these effects are being dwarfed by contributions from immigration and non-permanent resident admissions, driving multi-decade high population growth in all provinces. That arguably justifies the focus on infrastructure spending that was a theme of the 2023 provincial budget season.
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