Key points

• There is renewed focus on attracting capital and building more in Canada.
• If successful, a new challenge will be finding qualified workers—particularly in the construction trades.
• Slower population growth and aging will constrain the supply of workers. 

I often get the question—what keeps you up at night? My usual answers around trade wars, duration of the AI boom and inflation surprise no one. 

But one response I recently gave did raise some eyebrows - finding qualified workers.

It’s surprising because the unemployment rate is still elevated in Alberta and Canada, particularly among youth. In the current trade spat, with on-and-off tariffs, businesses remain in a cautious hiring stance. Most firms in Canada are not reporting labour shortages. 

It’s also surprising because for the last few years I’ve been harping on Canada’s investment—not labour—problem.  Like a broken record, I’ve been arguing that Canada needs to get more of its growth from private spending on productive assets. The old formula of relying on consumers, housing, and government spending (fueled by ultra-low interest rates) to drive economic growth wasn’t going to work. 

Well, investment is the focus, perhaps even the obsession, at the moment. Last month, PM Mark Carney held an Investment Summit with the goal of catalyzing a trillion dollars in new investment.  

After months of words and promises, we’re starting to see policies aimed at stimulating this investment—immediate capital write-offs and a move to streamline and fast-track regulatory reviews. Closer to Alberta, LNG Canada phase 2 reached FID and the odds are increasing of a West Coast pipeline now that it received a designation in the national interest. 

It will take time to turnaround the investment ship. To date, we haven’t seen much of an uptick—indeed, real business investment is flat in the first half of the year compared to the same time last year.  My view is that investors will need to be convinced that Canada can execute with much more efficiency than in the past before the investment needle really moves close to federal aspirations.  

But what if it does? We’re going to need workers—lots of them. For example, we estimate that the Pacific Link and Pathways projects would increase nationwide employment by up to 90,000 annually over the 2028 to 2036 period. 

Finding workers is a good problem to have after a decade-long investment drought, but it’s still a problem to be solved. Carol Kamel and I will soon be publishing a special report on Population Aging, which will include a deep dive on that topic.

For now, this week we have a  two-part series, looking at three factors that will reduce the availability of workers:

 1) Slower population growth (part 1)

 2) Workforce aging (part 1)

 3) Existing shortages in the construction trades (part 2) 

Population growth is slowing to a crawl

In 2026, Canada’s population grew 0.5%—the slowest annual rate since 1916*.  The population pendulum has swung from rapid growth of about 2.9% in 2024 to essentially flat due to declines in the non-permanent resident (NPR) population.  

The new federal target for NPRs is 5.5% of the population.  As of July 1, that share is 6.7% —so more NPR declines are expected. .

Once the NPR population adjusts, the new cruising speed for the population will be 0.5-1% a year over the next decade depending on what medium projection you use from Statistics Canada.  

Alberta’s cruising speed will be higher, around 1-1.5% depending on the scenario, thanks to larger natural increase (births minus deaths) and interprovincial inflows.  Still, that’s a massive downshift from ~3%/year over the past four years. 

It may seem counterintuitive that Alberta’s unemployment rate (6.8% in August) remains higher than the national average (6.4%) despite it leading all provinces in employment growth this year. 

But the reason is straightforward—Alberta is not only leading in job growth, it’s also leading in new job seekers.  A faster growing population and labour force are preventing a larger drop in the unemployment rate. 

We expect that to change, with more balance returning to the labour market. 

Our baseline forecast, which does not include major projects that have yet to reach final investment decisions (including the Pacific Link), has the unemployment rate falling from 6.7% this year to 6.2% next year and 5.9% in 2028 even as job growth slows.  The reason? Slower population growth and a falling participation rate due to aging.

Population aging will hit with greater force

You can’t just count people, you need to consider the age structure of the population.  

It’s true that population aging has been a negative drain on the labour force for years (the oldest baby boomers turned 65 in 2011). This isn’t new.  

But there has been a massive counterforce—an increase in the labour force participation rate (share of population working or looking for work) among older Canadians. The population aged 65+ has increased its participation rate from only 6% in 2000 to 15% in 2026.

This begs the question: how much more can we expect the 65+ population to work? 

This matters because over the next five years we’ll continue to see large gains in the 65+ population in Canada— 2.6% per year vs 0.1% for the under 65 population using medium (M3) Statistics Canada projections. 

By 2029, all baby boomers will be at least 65—the average retirement age in Canada.

To quantify the impact, we ran a thought experiment: what happens if the labour force participation rate for each 5-year age group remains at 2025 levels?  We then applied those age-specific population rates to population growth projections for the same age groups using a medium growth scenario (M3).  The results are below for Alberta and Canada (we will release results for all provinces in a forthcoming paper). 

You can quibble with our assumptions.  Perhaps you think that the 65+ crowd can dramatically increase its participation rate to counteract this aging force.  Or perhaps you think population growth will be faster.  

But in our view, you’d need to apply some pretty heroic assumptions to prevent the participation rate from declining.

Bottom line:  As Canada pushes to build and invest more, a ready supply of workers cannot be taken for granted.  Population growth is slowing, and we haven’t felt the full effects of aging on the workforce. 

In our next edition of “who’s going to build?” later this week, we will look at the job market and demographics in the construction trades.  

*Based on a comparison of census years, measured at mid point of year (July 1 to July 1)

Answer to the previous trivia question: Diesel is used for truck transportation because diesel engines provide the high torque and fuel efficiency needed to haul heavy cargo over long distances reliably.

Today’s trivia question: What is the typical capacity of a Very Large Crude Carrier (VLCC), the standard large tanker used for global oil transport?