Rapid population growth is challenging economists’ understanding of the economy as they monitor how businesses and consumers are responding to high interest rates.
BMO chief economist Douglas Porter said the strong population growth is making economists like himself reconsider what a normal monthly jobs report should look like. Before the pandemic, the Canadian economy would add 10,000 to 15,000 jobs in a typical month, he said. “Employment levels are going to be increasing a lot, just because we’re adding a lot of people to the population. But I don’t think that tells us necessarily very much about the health of labour markets,” Skuterud said.Higher population growth is also increasing the size of the economic “pie” as more people find jobs and spend money on goods and services.
To gauge how well the economy is going for the average person, economists tend to prefer looking at real gross domestic product per capita. That figure remained flat between the last quarter of 2022 and the first quarter of 2023.As the Bank of Canada looks to rebalance demand and supply in the economy, economists and the central bank are generally unsure what the net effect of higher immigration will be on inflation.
Activity in the housing market slowed down significantly last year as the Bank of Canada started raising interest rates. More recently, however, the housing market appears to have levelled off as demand surges again.