Could Canada's population gains from immigration in recent years be the only thing keeping the country from falling into a full-blown recession? Or are we already there, and could clamping down on immigration weaken our economy further?

Canada's faltering economy and the government's changing attitude toward immigration were the subject of a January 23 report from chief economist Benjamin Tal at CIBC World Markets. 

He pointed to statistics suggesting Canada's population grew by 3.2 million between 2021 and 2024, saying top-line measurements on growth versus contraction could be propped up by new arrivals.

More people present to drive economic activity would push gross domestic product (GDP) figures higher — with overall GDP painting a rosier financial picture compared to what many people in Canada are experiencing day-to-day.

"The Canadian economy was able to avoid a full-blown recession only due to the meteoric ascent in population growth in the past few years," Tal wrote in the report.

Canada has been in a recession already for two years: B.C. expert

But Andrey Pavlov, professor of finance at Simon Fraser University's Beedie School of Business, says Canada is already in a full-blown recession.

"We often use GDP total as a shortcut. Because population tends to stay stable over time, so then it's not worth worrying," he said. "But the appropriate measure of economic growth is GDP per capita, and that has been declining for two years."

A country meets the traditional definition of a recession when its GDP declines for two consecutive quarters. When looking at GDP per capita figures, Pavlov said Canada has been in recession territory for some time.

Swift population growth in recent years has tugged Canada's average age down, which Tal said is positive for the country battling the challenges of an aging population. 

But he characterized new arrivals in recent years as "too much of a good thing, too quickly." That's because Tal thinks Canada is experiencing "capital dilution" where the population has expanded so quickly that public services cannot keep up — and neither can the housing supply.

"Unplanned population growth places enormous pressure on governments already struggling to provide public services for its existing population. With the sheer scale of the population/capital mismatch in Canada, the public backlash was both predictable and inevitable," Tal wrote.

Canada's federal government abruptly changed its approach to immigration in the latter half of 2024 amid public opinion polls suggesting more Canadians think immigration levels should decrease. Justin Trudeau's Liberal government lowered Canada's immigration targets and tightened rules for several pathways to live in Canada.

But Pavlov doesn't think clamping down on immigration is the right path forward. He sees the problem as Canada failing to create an environment where newcomers can thrive — by leaning into entrepreneurship or using their skills as employees for businesses able to nimbly hire and expand.

"I think the first step is to remove excessive red tape, regulation, and taxes," he said. "They have made it very expensive and risky to operate a business in Canada. And by doing so they constrain the goods and services that Canadian business can provide."

What's more, reducing immigration has severe consequences for young people already in Canada — spending their most productive years in school or working here.

"It's something that's very dear to my heart. Because I have students who came here to study and then to work. And somehow their circumstances changed," Pavlov said. "Those are real stories of people who are incredibly smart, some of them are the best students in my classes."

Pavlov called it misguided that Canada would send people away before fostering an environment where they could contribute to the exchange of goods and services.

Tal agreed that Canada's recent population boom of relatively young newcomers will benefit the country in the long run.

"From a longer-term perspective, retaining and integrating current immigrants and [non-permanent residents] would result in stronger potential growth and improved productivity," he wrote.

Some experts have made headlines recently for supporting the idea that Canada is already in a recession. Among them are Stephen Poloz, former head of the Bank of Canada, and B.C. Housing Minister Ravi Kahlon.

Unemployment hit 6.8 per cent in December, the highest it's been in eight years. Statistics Canada also released data Thursday suggesting income inequality increased in the third quarter of 2024.

Canada's central bank lowered its key interest rate another 25 basis points last week to 3 per cent. The BoC noted lower interest rates were boosting household spending and it expects the economy to strengthen gradually — though potential tariffs from U.S. President Donald Trump are stoking uncertainty.