After soaring in recent years, Canada’s population growth ground almost to a halt in the second quarter of 2025, rising just 0.1 per cent from the prior quarter. E
conomists and researchers who follow the numbers said
the federal government’s reduced targets for
permanent and temporary residents were primarily responsible for the slowdown, but just how long it lasts remains to be seen.
Here, the Financial Post explores what diminished population growth might mean for different sectors of the economy, from labour to housing
and beyond.
Why has Canada’s population growth slowed?
reached 41,651,653 people in the second quarter of 2025, just 0.1 per cent higher than the first quarter of the year, according to Statistics Canada. The agency said this marks the
in a second quarter since 1946 (barring border restrictions during the COVID-19 pandemic in 2020). While the population was up 0.9 per cent on a year-over-year basis, Statistics Canada said nearly 60 per cent of the increase occurred in 2024, before the number of
temporary residents in Canada began to decline
.
The number of temporary, or non-permanent, residents has fallen for three straight quarters from the peak of 3,149,131 hit in October 2024. By July 2025, there were 3,024,216 temporary residents in Canada.
In March 2024, the government said it would slash the number of temporary residents (including foreign students and temporary workers) to five per cent of the total population over the next three years. The government’s
, which also reduced permanent resident targets, is intended to result in a slight population decline of 0.2 per cent in 2025 and 2026 before returning to a population growth of 0.8 per cent in 2027.
“
Canada needs immigrants like oxygen
, but it was simply too much of a good thing,” said Benjamin Tal, managing director and deputy chief economist at Canadian Imperial Bank of Commerce (CIBC) Capital Markets.
Tal said Canada’s infrastructure couldn’t keep up with rapidly rising numbers in recent years, but this slowdown in immigration and population growth also means reduced potential for economic growth.
Cynthia Leach, Royal Bank of Canada (RBC) assistant chief economist, told Financial Post that Canada strongly relies on immigrants for its population growth, given its typically low natural population growth level
—
the difference between the number of births and the number of deaths.
Canada’s population is steadily aging while the fertility rate is declining, hitting its lowest recorded rate of 1.25 children per woman in 2024 according to Statistics Canada. Given the federal government’s reversal of its immigration policy, Leach expects to see near-zero population growth in 2026 and 2027, she wrote in a recent report. RBC predicts it will take longer for non-permanent residents to leave the country, resulting in some population growth for a slightly longer period of time, pushing the near-zero growth period into 2027, instead of reversing that year as the government has planned.
However, researchers don’t see this halted population growth rate as a sign of a permanent shift in Canada’s demographics.
“If (the government) were to tighten up on immigration (to the point that the population growth rate turns negative) … the government budget would be pretty negatively affected,” said Nathaniel Baum-Snow, a professor of economic analysis and policy at the University of Toronto’s Rotman School of Management. “I would expect that the current government is trying to calibrate the immigration flow so that there is a slowly growing population.”
Baum-Snow said Canada’s population likely won’t swell as quickly as it had in recent years, but will still increase at a rate that brings sufficient revenue to the government budget.
What does this mean for businesses?
The population growth slowdown, especially if sustained, could have repercussions for business hiring in the future.
Canada is careening toward a
in future years, despite today’s limited job openings and high unemployment rate, RBC’s Leach said in her report.
Leach said 5.2 million baby boomers have already left the labour market and more are expected to ride a massive
by 2030.
“Assuming in-migration returns to a more normal rate of 0.9 per cent of the population post-2027, we expect more than a two-percentage point decline in labour force participation between 2024 and 2030,” Leach wrote.
Some sectors could be more heavily affected than others. Nine of 21 sectors have more than a quarter of employees over the age of 55, a share that tops the overall average of 21 per cent, Leach said. In fishing and agriculture, these older employees account for about 40 per cent of the workforce.
Regions such as British Columbia, Quebec and the Atlantic have higher median ages, which means they are more likely to face the brunt of this retirement wave.
from Leach indicated Ontario and British Columbia have also been hit the hardest by the decline in non-permanent residents.
CIBC’s Tal said the service industry could be most affected by the federal government’s tightened immigration policy. According to Statistics Canada, more than a quarter of workers in the food and beverage sector are immigrants.
The agency also reported that immigrants account for 32 per cent of all business owners with paid staff, creating local jobs in many sectors, including construction, professional services, health care and retail trade.
These experts told Financial Post that businesses are likely to find workers in the short term, given the current tariff uncertainty, which has led to a pullback in business investment and hiring. But Leach said in the long term, businesses might need to consider ways to expand the domestic labour pool, such as offering skills training, making technological investments to increase productivity or increasing wages.
“It’s going to become more consequential in a couple of years’ time, and we’ve got to start preparing for it now,” she said.
What does this mean for the housing market?
The construction sector is already facing a slowdown and is the sector most likely to be hurt by low population growth, Baum-Snow said. Large metro areas such as Toronto and Vancouver are key destinations for new immigrants so demand for housing in these areas could be considerably affected, he said.
from real estate data analytics platform Altus Group found single-family sales have plunged by more than 50 per cent this year, while condo sales have sunk by nearly 65 per cent in Toronto.
Altus Group predicted that if construction spending contracts over the next five years, there could be a 47 per cent drop in direct jobs and a total decline of almost 41,000 total jobs across the economy. Employment in Toronto’s construction sector has already fallen to its lowest level since the spring of 2021.
However, stalled population growth could also present an opportunity for
, especially in the condo market.
Baum-Snow said throughout the country there has been a shift toward multifamily housing construction, since new buyers are more likely to be able to afford condo apartments as opposed to detached or semi-detached homes. As the supply of condos has ballooned over recent years, reduced demand due to limited population growth could make these apartments significantly cheaper to rent or purchase.
“I wouldn’t be surprised if there’s a period of rebalancing of the housing market that happens for a while, given all the condos that were built in the past decade (and) if the government maintains its current trajectory on immigration policy.”
This may not hold as true for semi-detached and detached homes, especially in the Toronto and Vancouver markets, Baum-Snow said.
What are other potential economic consequences?
Reduced immigration, particularly the entry of non-permanent residents who tend to skew younger in age — between 20 to 29 years old — is likely to have other economic effects. The declining fertility rate, increasing life expectancy and, now, the decreasing number of temporary residents in Canada, are contributing to an aging population and its associated costs.
Nearly one-in-five Canadians were aged 65 or older — the threshold at which many Canadians enter retirement — in July, the agency reported. This was a 3.4 per cent increase from a year ago, compared with only a slight 0.4 per cent increase in the number of Canadians aged 15 to 64. Statistics Canada attributed this slowdown in the younger age group to the decline in non-permanent residents.
RBC’s Leach said Canada will be grappling with the
peak aging impact of the baby boomers
in the next five years, which will not be offset by increases in immigration.
RBC estimated the country has seen only 11 per cent of the additional health care costs of aging boomers. Leach said Canada will face increasing fiscal pressures from unfunded expenditures such as Old Age Security entitlements and provincial health-care costs.
Baum-Snow said that these associated costs for the elderly population, including pensions, will become more difficult to manage if there are fewer working-age taxpayers who can fund them.
“Annual health-care costs escalate quickly in old age from about $3,400 in 2022 at age 40 to $10,000 at 70, and more than $36,000 at 90,” Leach wrote in her report. “Canada’s rising seniors’ dependency ratio — the mirror of the falling (labour) participation rate — means there are relatively fewer workers to shoulder this burden.”
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