Canada’s population is on track to shrink again this year, following a record population drop in the third quarter of 2025 — but that trend may not be sustainable, according to Desjardins Group Inc.
In a new report, Desjardins said the recent population drop was driven by a record decline in the number of non-permanent residents (NPRs). While the federal government is pursuing a policy of reducing the inflow of NPRs, the data also suggests that the weak job market was also a factor, leading to a surge in outflows of temporary residents.
Indeed, the report noted that while federal immigration policy may be restricting inflows, “there is convincing evidence that economic conditions could be contributing to recent outflows.”
The recent increase in NPR outflows was driven by both a drop in foreign students, and work-and-study permit holders, it said. Desjardins also noted that the weaker job market has hit younger workers harder, and unemployment has risen at a faster pace for young immigrants (aged 15 to 24) than for the youth population overall — a strain that’s been exacerbated by trade tensions between Canada and the U.S.
“Indeed, the difficult labour market for Canadian youth ages 15 to 24 and the slowdown in hiring caused by the trade war with the U.S. no doubt played a role in souring job prospects for NPRs in 2025,” the report said.
Looking ahead, Desjardins said that if the government’s immigration targets — reducing the share of NPRs to 5% of the overall population — are achieved, “Canada’s population could decline for two consecutive years, before advancing again in 2027 and 2028.”
However, sticking to the government’s targets on immigration could prove tricky, given Canada’s declining fertility rates and aging population.
“While restricting immigration could help improve Canada’s weak GDP per capita performance and potentially improve housing affordability, it may lead to unforeseen consequences for the labour market, economy and government finances given Canada’s aging population,” it concluded.