Pandemic immigration boom masked Canada's economic weakness

Years of high immigration intake papered over cracks in Canada's economy, economists say — boosting overall growth while household conditions deteriorated.

Prime Minister Mark Carney has cited lower immigration under his government to explain why Canada's economy has declined for the last two quarters. Critics, including Conservative immigration critic Michelle Rempel Garner, argue the pandemic's rapid intake of temporary foreign workers both masked and worsened structural economic problems.

"Mass rapid intake of low-skilled temporary foreign labour both masked and juiced structural economic issues," Rempel Garner posted Tuesday. Carney acknowledged the link: "It's a basic fact. We're putting in place the foundations of a stronger, more resilient, more independent Canadian economy."

Royal Bank economist Nathan Janzen ran the numbers. High population growth, driven by immigration, did prop up measures like total GDP growth and total employment. But it concealed deeper trouble: rising unemployment and high interest rates as the Bank of Canada fought inflation.

Canada's population grew by 2.4 per cent in 2022, 3.1 per cent in 2023, and 2.21 per cent in 2024 — well above historic averages of around one per cent annually before the pandemic. But per-capita GDP was declining and unemployment rising in ways "historically you only usually see in a recession," Janzen said.

"When ostensibly the economy looked relatively firm, we actually saw on a per-capita basis conditions that were indistinguishable from a recession," he explained.

The federal government has now reduced immigration targets. This year's plan admits 380,000 permanent residents, 230,000 temporary workers, and 155,000 students — sharp drops from the 2024 plan's projection of 500,000 new permanent residents in 2026. Those cuts may slow GDP growth further in the near term but could improve household economics over time.