If the labour growth rates of the last two years had been maintained through 2025, TD Economics estimates today’s unemployment rate could have surpassed eight per cent — it currently stands at 7.1 per cent. (Photo by Zou Zheng/Xinhua via Getty Images) · Xinhua News Agency via Getty Images
Canada’s population growth has slowed dramatically after the federal government dialled back immigration targets — a shift that’s beginning to cool rent increases and stabilize job markets, a new TD Economics report says.
“The federal government’s revised immigration plan is beginning to pay dividends in returning balance to a stretched social infrastructure,” said Beata Caranci, senior vice-president and chief economist, in the report.
In response to concerns that rapid immigration was contributing to housing affordability challenges and labour market strain, Ottawa launched a plan to tighten targets for non-permanent and permanent residents, allowing infrastructure to catch up. TD Economics states that the effects of this adjustment are now evident in slower population growth and reduced pressure across housing and labour markets.
Specifically, the policy shift has led to a significant tapering in Canada’s population growth, falling from a multi-decade high of 3.2 per cent in the second quarter of 2024 to 0.9 per cent year-over-year, Caranci says.
In the purpose-built rental market, slower immigration has led to a softer rent growth forecast of three to 3.5 per cent in 2026 — roughly half the pace seen in 2024. However, Caranci notes that lower interest rates are also encouraging more Canadians to buy homes, while government efforts have also boosted rental construction.
In a modelled scenario where population growth had remained higher, average rent growth from 2025 to 2027 would be approximately 5.5 per cent — two percentage points higher than the current forecast.
“We estimate that the average Canadian would have been paying an additional $1,100 per year to rent a one-bedroom apartment by 2027,” Caranci said.
Dwindling immigration numbers are also cooling demand in the condominium market, both for ownership and secondary rentals, something that has caused downward pressure on asking rents across major cities, she says.
The largest shifts are seen in B.C. and Ontario, where there is a higher proportion of temporary foreign workers and international students.
Meanwhile, the unemployment rate would have risen without tighter immigration, Caranci says.
“Readjusting immigration targets came at an opportune time,” she said. “Employer demand for new workers has recently made a U-turn, with net job losses amounting to 40,000 positions between July and September 2025. We believe another 40,000 are at risk this year.”
Still, the report suggests that unemployment is likely to rise only slightly before trending lower in 2026, as weaker labour-force growth mitigates the impact of job losses.
If the labour growth rates of the last two years had been maintained through 2025, Caranci estimates today’s unemployment rate could have surpassed eight per cent — it currently stands at 7.1 per cent.
“This is a reminder that immigration policy shouldn’t be static,” Caranci said, noting that an increase in immigration during the pandemic helped address labour shortages in key sectors of the economy.
Early on, Canada demonstrated a capacity to integrate these new workers, she adds. However, this capacity was exhausted as the labour force growth approached nearly four times its pre-pandemic growth rate.
“Adjustments should reflect changing market conditions and skills demands,” Caranci said.