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3 days ago
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Posthaste: Canada's unemployment rate could rise a lot higher on still strong immigration
Canada's unemployment rate could hit 7.5 per cent as more newcomers are admitted to the country than expected after the government made massive cuts last year to its immigrant targets, says a new report. 'Visa approvals for temporary residents have picked up, which suggests that, rather than contracting as the government previously outlined, the population will continue to grow this year,' Harry Chambers, an assistant economist at Capital Economics Ltd., said in a note. 'This will keep upward pressure on labour force growth and we now expect the unemployment rate to peak at 7.5 per cent, rather than seven per cent.' The growth in newcomers is the opposite of what former prime minister Justin Trudeau touted after his government cut its targets for temporary foreign workers, students and permanent residents. 'We're going to significantly reduce the number of immigrants coming to Canada for the next two years. This is temporary — to pause our population growth and let our economy catch up. We have to get the system working right for all Canadians,' Trudeau said in a post on X after announcing that 21 per cent fewer permanent residents would be allowed into the country. However, temporary resident visa approvals have increased and are on pace to overshoot the government's target. Annualized population growth slowed to one per cent in the fourth quarter of 2024 from a peak of 3.6 per cent the year before. For 2025, the Trudeau government said Canada's population would fall by 50,000. As a result, the population was expected to fall by 0.2 per cent in both 2025 and 2026, dramatically reversing annual growth of almost three per cent for the past two years. 'Nonetheless, there is reason to doubt that the government will fully meet its targets,' Chambers said, adding Capital Economics expects the population will grow by at least 200,000 this year and next. Scotiabank Economics, which is tracking population and changes in permanent and temporary residents to see if government targets are met, said Canada's population aged 15 and up grew 1.9 per cent in April on a seasonally adjusted annualized rate and 1.8 per cent in March. 'A positive monthly growth trend still close to two per cent as we approach the halfway point of 2025 seriously starts to erode the government's ambitious (and always unlikely) plan of shrinking the overall population this year by 0.2 per cent,' Anthony Bambokian, a senior economic analyst at the bank, said in a note. Chambers said another reason to doubt Ottawa's immigration targets will hold is the 'uncertainty' about how many people who are supposed to leave Canada after their permits expire actually do so. Statistics Canada's population estimates assume visa holders leave the country within 120 days after their permits expire. 'In reality, many stay longer; some transition to permanent residency and others stay under temporary extensions while awaiting decisions on new applications,' Chambers said. In addition to the cuts to permanent residents, Ottawa last August said it was restricting the number of temporary foreign workers entering Canada, and earlier that year announced a 35 per cent reduction in study permits. Capital Economics, which assumes temporary residents leave as expected, but visa applications continue to rise, expects Canada's population to grow by 0.5 per cent this year and next. That means the number of people looking for work could be 'much higher than the near-zero rate implied by the government's targets,' Chambers said. 'Conversely, we expect employment to decline on net in the next couple of quarters as tariff effects weigh on hiring. Together, this would push the unemployment rate to a peak of 7.5 per cent by the end of this year.' to get Posthaste delivered straight to your inbox. Canada's trade deficit swelled to the largest on record in April as Donald Trump's tariffs hurt exports to the United States. Canada's overall merchandise trade deficit grew to $7.1 billion in April from $2.3 billion in March due to a 'significant, widespread decline in exports,' Statistics Canada said on Thursday. Read the full story here. Today's Data: Canada and the United States release jobs numbers for May, U.S. consumer credit Inside the 'notorious' Canadian shopping mall on a U.S. trade irritant hit list Bank of Canada hearing less talk of 'catastrophic outcomes' from businesses Bank of Canada should have cut rates this month: Desjardins It's critically important to keep receipts for any deductions or credits you plan to claim on your tax return, says tax expert Jamie Golombek. While this goes without saying for obvious items such as charitable donations and eligible medical expenses, it's perhaps even more important to keep receipts of other expenses, such as employment or business expenses, that you plan to deduct on your return to lower your final tax bill. Find out more here. Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@ with your contact info and the gist of your problem and we'll find some experts to help you out while writing a Family Finance story about it (we'll keep your name out of it, of course). Want to learn more about mortgages? Mortgage strategist Robert McLister's Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won't want to miss. Plus check his mortgage rate page for Canada's lowest national mortgage rates, updated daily. Visit the Financial Post's YouTube channel for interviews with Canada's leading experts in business, economics, housing, the energy sector and more. Today's Posthaste was written by Gigi Suhanic with additional reporting from Financial Post staff, The Canadian Press and Bloomberg. Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@ Homeowners up for renewal are in for a wake-up call These three provinces are most at risk as cracks appear in Canada's economy Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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18-03-2025
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Bank of Canada's job just got 'even harder': Economists on the latest inflation numbers
February's consumer price index report took economists by surprise as the rate of inflation accelerated on a year-over-year basis to 2.6 per cent in February, outpacing analyst estimates for a 2.2 per cent increase. Statistics Canada said the end of the GST/HST holiday in mid-February was the main reason for the pickup in inflation, which jumped from 1.9 per cent in January. Here's what economists think the new data means for the Bank of Canada and interest rates. The 'upside surprise makes the Bank of Canada's job even harder,' Stephen Brown, deputy chief North America economist at Capital Economics Ltd., said in a note. He said the inflation numbers cast doubt on expectations that policymakers will cut interest rates for an eighth consecutive time at their next policy meeting on April 16. The CPI outstripped estimates, but, more importantly, the central bank's preferred measures of core inflation, which remove taxes, also rose last month, Brown said. CPI-trim and CPI-median increased to an annualized three-month average rate of 3.3 per cent, which is above the top end of the Bank of Canada's inflation target range of three per cent. 'The upshot is that, despite the downside risks to the economic outlook from U.S. tariffs, we may need to revisit our view that the (Bank of Canada) will cut interest rates again as soon as next month,' Brown said. The Bank of Canada warned it had considered holding interest rates when it cut on March 12, despite the threat United States tariffs pose to the economy. Royce Mendes, managing director and head of macro strategy at Desjardins Group, said the latest inflation report gives policymakers plenty of reason to 'temporarily' pause rate cuts as inflation appears to be on the march again. He said the number of items in Statistics Canada's CPI that rose by more than three per cent annually jumped to the highest level since May 2024. Furthermore, a core measure of services inflation that excludes shelter — an often-cited culprit for runaway inflation — also rose on a three-month annualized basis, to 3.5 per cent from 2.9 per cent in January. 'With price growth likely to accelerate in the months to come as a result of retaliatory tariffs and past currency depreciation, now seems like the right time for the Bank of Canada to take a hawkish detour, driving home the point that containing inflation remains the central bank's number one job,' Mendes said in a note. Tuesday's inflation report 'puts the (Bank of Canada) in a difficult place,' Leslie Preston, managing director and senior economist at Toronto-Dominion Bank, said in a note, citing the increase in the headline inflation number as well as the rising trend in core inflation. The dynamics are in place for that trend to continue, given that Canadians' expectations for inflation have risen, even as 'the hit to demand from uncertainty and the tariffs themselves' weighs on consumption, despite a 'highly uncertain' tariff landscape,' she said. TD is forecasting elevated tariffs over the next six months, after which they will be gradually reduced. 'In this world, we expect the Bank of Canada to provide some further cushion in the form of two more 25-basis-point rate cuts at its next two rate announcements,' Preston said. Markets have now 'slightly' cut the odds of another interest rate cut on April 16, 'but we will know a lot more about the path of tariffs by the time the decision rolls around,' she said. Headline inflation rose above two per cent for the first time since July 2024, economists Tony Stillo and Michael Davenport at Oxford Economics Group Ltd. said in a note, adding that while the GST/HST tax break muddied the CPI picture, 'there are signs that price growth has picked up.' A measure of CPI that controls for the GST/HST holiday jumped to 2.7 per cent year over year in March, and the three-month measure of core inflation minus food and energy has been climbing despite the temporary tax break, they said. Stillo and Davenport highlighted various moving parts in the inflation outlook, including an end to the consumer carbon tax on April 1. They estimate that will lower CPI by 0.5 per cent in April. March will also be the first full month post the GST/HST break, but inflation will also factor in retaliatory tariffs currently worth roughly $60 billion. 'Still, with headline CPI inflation now back above two per cent year over year and a U.S.-Canada trade war well underway, we expect the Bank of Canada will hold rates steady as it guards against upside risks to inflation from tariffs, supply chain issues, and rising inflation expectations,' they said. • Email: gmvsuhanic@
