Newcomers have been tied, fairly or not, to many of Canadians’ socioeconomic woes in recent years, prompting Ottawa to slam the brakes on the country’s rapid immigration growth.
International students were blamed by many Canadians for the affordable housing crisis; foreign workers for depressing wages and stealing jobs; and asylum seekers for draining government resources.
Since 2024, when Justin Trudeau was still prime minister, the federal government has drastically reduced the entry of new students and workers to Canada while restricting eligibility and access to asylum.
Since many study and work permits are for multiple years — and in part due to gaps in data collection, the share of temporary residents in the overall population has only crept down slowly from the peak of 7.6 per cent in 2024 to 6.7 per cent as of July 2026.
The post-secondary education sector has been the hardest hit by the international student caps, struggling with revenue loss, program cancellations and layoffs, said Larissa Bezo, president and CEO of the Canadian Bureau for International Education.
What keeps her up at night, she added, is how to sustain a healthy international talent pipeline to support the Carney government’s ambitious nation-building projects.
Bezo pointed to an example of what that talent shortfall would look like with the recent release of Canada’s nuclear energy strategy, and its projected demand for thousands of mechanical engineers, skilled trades and nuclear workers required in the coming years.
“International education operates on a multi-year cycle,” she said. “A scalpel could have been used rather than a hammer. I think we could have blunted and mitigated the risks to our future talent pipeline had there been a more careful approach applied.”
The government’s blunt measures to reduce the temporary population have also affected different sectors and local communities differently across Canada, said David Pierce, vice-president of government relations at the Canadian Chamber of Commerce.
Certain sectors such as manufacturing, food processing, hotels and restaurants are in particular trouble in some areas when it comes to finding workers, he added.
A survey by Hotels Canada, for instance, found 72 per cent of hotels reported difficulty attracting local workers and 58 per cent anticipated workforce shortages while 46 per cent lost temporary foreign workers due to expiring permits.
“Canada is so big that the reality in Montreal is not going to be the reality in Thunder Bay,” said Pierce, whose organization consists of more than 400 local chambers of commerce and boards of trades across the country.
“While some markets and some sectors appear to be saturated and there are too many people and job applicants, others need more people.”
Parisa Mahboubi of the C.D. Howe Institute said a smaller number of people coming here is bound to affect the growth of the labour force, Gross Domestic Product, job numbers and demand for goods and services.
At the aggregate level, she said she hasn’t seen significant negative impacts on the labour market in terms of employment, though she recognized there are regions facing labour shortages. However, she said that has been a chronic challenge for smaller communities, and immigration can’t address all labour needs.
Some labour market imbalances are not necessarily a bad thing, said Mahboubi, who chairs the Toronto think tank’s immigration targets council. A labour shortage can mean the economy is creating more jobs than workers available, and result in improvements in wages and working conditions, prompting capital investments in technology and automation when possible, she added.
“That’s something that Canada desperately needs right now,” she said. “We saw a reduction in productivity when we had high immigration and cheap labour available.”
Mahboubi said one positive outcome of the immigration shift is that GDP per capita has shown some improvement. GDP per capita is the total value of all goods and services produced and divided by the population of the country, widely considered as a measure of the standard of living.
The recent population slowdown has also offered relief for those in the housing market in terms of vacancy rates and rents, as well as lowering unemployment rates, she noted.
However, reduced population can also affect the housing market in other ways.
In its 2026 outlook report, the Canada Mortgage and Housing Corp. said new home construction is set to decline through 2028 as developers face high costs, weaker demand and more unsold homes amid geopolitical and trade uncertainty, significantly lower population growth, soft labour markets and modest income growth.
“Certainly rents have stabilized,” said Stein Monteiro, lead immigration researcher at Signal49 Research, formerly known as The Conference Board of Canada.
“Are we still building the same amount of homes as we were when we had high immigration numbers? I would say no, because a lot of the pre-developments are pretty much stopped. Developers are choosing to keep land vacant rather than continue building.”
Not only are some of the bureaucratic regulations and zoning issues affecting housing supply not resolved yet, Ottawa’s immigration levels also signal to developers future demand for housing, which in turn provides the incentive to build, he said.
“It gives confidence,” said Monteiro. “From my perspective, immigration was boosting some of that housing supply.”
Mahboubi of the C.D. Howe Institute said it’s not possible to isolate immigration impacts given all the other factors involved in these issues, but immigration policy changes certainly play a role.
“There are always losers and winners when it comes to immigration,” she said. “The biggest question is how to mitigate negative impacts and maximize the benefits of those reforms.”
