1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 51
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
specifically international students and foreign temporary workers. While rapid population growth
in the post-pandemic era was criticized for straining social services, putting stress on an alreadystretched housing market, and exerting upward pressure on youth unemployment, the BoC
warned in its latest Monetary Policy Report that soft population growth could pose a headwind
to aggregate consumption ahead. On the flip side, lower labour supply means fewer workers are
needed to keep the employment rate steady.
Canada’s population registered its largest drop on record in 3Q25 amid tighter immigration
policies
500
42000
400
300
40000
200
100
38000
0
-100
-200
36000
2018
2019
2020
2021
Natural increase - LHS
2022
2023
Net int'l migration - LHS
2024
2025
Population - RHS
Source: Statistics Canada, Bloomberg Finance LP, Scotia Wealth Management
As labour supply falls, the breakeven pace required to keep the employment rate steady is
expected to decline
80
60
40
20
0
-20
Jan 2024
Jun 2024
Nov 2024
Forecast period
Apr 2025
Sep 2025
Pace that keeps the employment rate constant
Employment growth (3-mth moving avg.)
Source: BoC October 2025 Monetary Policy Report, Scotia Wealth Management
The greatest source of uncertainty stems from the upcoming USMCA review that will determine
whether the Canada-U.S.-Mexico trade framework is extended, adjusted, or becomes a source of
uncertainty, with meaningful economic implications for Canada given its heavy reliance on the
U.S. market. In the most favourable scenario, the agreement is renewed largely unchanged,
preserving tariff-free access for compliant goods and supporting stability for investment,
manufacturing, and integrated supply chains, especially in autos, agriculture, and energy. A
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