Canada embarked on an ambitious mission to grow its economy using rapid population growth. After hitting unreal immigration targets they may have forgotten to plan one detail—what are people going to do when they get to Canada? That was the focus of the latest analysis from National Bank of Canada (NBF). The bank’s chief economist warns the country’s labor market is increasingly unable to absorb its population growth.
Canada’s Labor Market Attracted A Historic 125k Workers In January
Last week’s Labor Force Survey (LFS) showed historic growth for Canada’s working-age population. The country added 125k workers just that month, about 4.7% growth when annualized. While the headline data revealed a falling unemployment rate, we emphasized this was largely due to methodology. Increasingly the data considers more people as “long term unemployed,” due to giving up on trying to find employment.
In short, the country is producing a lot of workers. Finding jobs for all of these workers is proving much more difficult than policymakers had anticipated.
It’s Impossible For Canada’s Labor Market To Absorb This Growth
No place highlights the problem more than the Greater Toronto Area (GTA), according to NBF. The bank’s analysis shows 32.6k of the workers added last month arrived in this area. With annualized growth at 6.8%, the working aged population is growing nearly 50% faster than national growth.
“The GTA, which accounts for about 18% of Canada’s population, is currently responsible for more than 25% of the country’s population growth,” explains Stephane Marion, Chief Economist at NBF.
Adding, “With the current interest rate structure, it is simply impossible for the labour market to absorb such a large number of newcomers.”
Source: National Bank of Canada.
To illustrate this point, the bank provided the above chart—the employment-to-population ratio for the GTA. The ratio fell to 61.4% in January, the lowest level since 2021—in the middle of the pandemic restrictions. Not a great start.
Historically, the GTA is considered a high growth employment region that tends to outperform nationally. Marion warns the employment rate on average is 0.8 points higher than the national average, but that’s no longer the case. Migrating to the country’s economic engine now increases a person’s odds of unemployment, a potentially fatal issue for the national economy.
Canada Needs To Step Back & Take A Non-Partisan Approach
The bank’s chief economist urges policymakers to consider how disruptive this may be for Canada. Especially during a period of rapid population growth.
“We strongly advocate the creation of a non-partisan council of experts to provide policymakers with a transparent estimate of the total annual population growth that the economy can absorb at any given time,” says Marion.
“This council could play a key role in maintaining Canada’s international reputation as a welcoming place for foreign talent.”
NBF is far from the first institution to warn the Titanic is heading towards an iceberg. On several occasions, BMO has highlighted reckless scaling of the labor force without a viable plan. RBC, the country’s largest bank, has also warned that Canada is scrambling to attract labor but has no actual plan for what that talent will do.
