Canada’s stricter immigration policies appear to be reducing pressure on the labour market and on housing costs as U.S. President Donald Trump’s tariffs slam the economy, according to a new report.
In the report, a team of economists at TD Bank argue that, had the federal government not slashed its targets for permanent and temporary residents a year ago, and instead let population growth continue to balloon, the economy would’ve likely been in worse shape.
They say that if labour force growth rates of the prior two years were maintained through 2025, Canada’s unemployment rate would be around eight per cent right now — a full percentage point higher than the current 7.1 per cent.
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The last time the unemployment rate was around eight per cent in Canada was during the COVID-19 pandemic in May 2021, according to Statistics Canada.
“Immigration policy came in at quite an opportune moment,” Beata Caranci, TD’s chief economist and one of the study’s authors, told the Star. “Because it came in at the same time that all this global tension came through on our economy and companies became more hesitant to hire.”
The economy shed 40,000 jobs between July and September 2025. TD is expecting another 40,000 job losses this year as the trade war with the U.S. continues to fuel economic uncertainty.
Generally, tough job market conditions tend to be harsher on recent immigrants, whose unemployment rate has historically surpassed the national average. Newcomers continue to struggle with overqualification and underemployment, with more of them recently reporting being overqualified for their jobs, according to StatCan.
When it comes to housing, TD’s economists found that demand for purpose-built rentals has cooled down with fewer international students coming into the country since last year, which is helping curb rent prices.
At the same time, lower interest rates have helped reduce demand for rentals as more people shift towards homeownership, the report states.
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The average renter would have been paying an additional $1,100 per year for a one-bedroom apartment by 2027 if population growth had stayed the course in 2024, according to the TD report.
The Bank of Canada has also been watching these trends.
In September, governor Tiff Macklem said in response to a question from the Star that the central bank has been readjusting its expectations for the economy to reflect lower population growth.
“As the economy reopened post pandemic there was a big surge in population growth in Canada,” said Macklem. “And what did that do? Well, the labour market overheated, it added some workers. It also put more pressure on the housing market and boosted consumption. We are now seeing the other side of that.”
Another surprising finding by TD’s economists is that consumer spending seems to be holding steady, despite fewer consumers participating in the economy.
“Spending growth should have come down a lot and it didn’t,” said Caranci. “That’s because the immigrants were largely non-permanent residents. Many of these were students, many of these had low-paying jobs, part-time work.”
Non-permanent residents made up 70 per cent of the population growth between 2022 and 2024, according to TD.
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Despite these findings, the researchers underscored the importance of immigration to Canada’s economy, arguing that government policies should reflect changing skills and market demands.
The tariff shock from the U.S. “serves as a reminder that immigration will need to maintain a crucial role in supporting Canada’s economic resilience,” the report concluded.
“Policymakers need to continuously develop solutions and programs that assist with the necessary economic transition that’s unfolding, to enhance strength and productivity in the labour market.”
