Record drop in population driven by NPRs raises structural questions for Canadian labour and growth
Canada recorded an unprecedented population decline in the third quarter of 2025, marking the first sustained drop outside the pandemic period and raising new concerns about the country’s demographic direction.
According to a Desjardins Economic Studies report by economist LJ Valencia, the decline was driven by an unprecedented reduction in non-permanent residents (NPRs), underscoring structural demographic change and raising new questions about immigration policy and labour market conditions.
Valencia’s report points to a historic turning point in population trends, noting that Canada “fell at a record pace in Q3 2025, which begs the question: was the recent drop in population a one-off or should we expect similar decreases moving forward?” The report identifies this as the first quarterly population decline since at least 1946, outside the extraordinary pandemic period.
While fewer international students and temporary workers entered the country, the much larger story was the surge in departures. As Valencia explains, “the drastic fall in net NPRs marked a stark reversal from historic norms, as the third quarter of the calendar year is typically the annual peak in net NPRs.” This break from long-standing seasonal patterns suggests more than a temporary disruption.
The report links the shift partly to federal policy changes aimed at reducing NPR numbers to align with immigration targets set in the 2025 budget. Valencia raises the possibility that population declines could persist in coming years before any recovery in 2027 or 2028, while cautioning that a single quarter cannot confirm a lasting trend. At the same time, the analysis warns that meeting future immigration targets may prove difficult given current demographic and economic pressures.
The demographic slowdown carries broader implications for Canada’s economic outlook. Youth cohorts, particularly those aged 15 to 24, saw some of the largest impacts because they are closely tied to NPR categories. This overlap with a cooling labour market highlights potential challenges for workforce availability, consumer demand and sectors that rely heavily on temporary residents.
Valencia’s findings signal that population growth in Canada is no longer a steady assumption. Instead, demographic volatility is emerging as a structural factor that could influence labour supply, housing demand, public finances and long-term economic growth in the years ahead.
