High rates of population growth can create a false impression of economic strength. Likewise, low population growth – or population decline – can give a false impression of economic weakness.
In a recent report, RBC Economics explains the effect Canada’s declining population is having on how we interpret economic data:
“A core reason for looking beyond GDP growth is the sharp swings in population growth Canada has experienced. These continue to disrupt traditional interpretations of data. Notably, the past two quarters of GDP decline both coincided with population declines—the first on record since the 1950s.
While the total pie shrank, real per-person growth has continued to expand. This matters because per-capita measures better reflect how households and workers experience the economy. Between 2023 and 2024, per-person GDP declined persistently while headline GDP was overstating economic health.”
Reversal
The significant population increases in the latter part of the Trudeau era gave the impression of economic strength, as more people generated more overall economic activity. But the population grew faster than GDP, leaving people worse off per capita. This is why many people felt they were getting poorer even as the economy grew. They were.
Now, the reverse is true. The overall GDP numbers give the impression of economic weakness, as there are fewer people in Canada and less overall economic activity. But the decline in economic activity is smaller than the decline in the population, meaning people are slightly better off on a per capita basis. A good way to visualize this is to compare $1000 divided up among 10 people, and $900 divided up among 8 people. While less money is being divided up in the latter example, each person has more than in the former example.
This is also why messaging focused on claims that Canada is in a full-blown recession will struggle to land with many voters. From the perspective of many individual Canadians, Canada’s economy is improving compared to 2023-2024. It is also important to note that Canada’s per capita GDP growth is occurring despite ongoing tariffs from the United States, which indicates underlying resilience.
Per capita GDP is the best indicator of our economic trajectory
When we imagine a prosperous utopian future, much of what we imagine is premised on high per capita GDP. In the long-run, higher economic output per person makes life better. If human societies can reach a high enough per capita GDP, true post-scarcity and widespread abundance are possible. That’s why, both to reach for that future, and to assess the health of our economy in the present, per capita GDP is what matters most.
Spencer Fernando
If this piece left you clearer than it found you, that's the point. I write for readers who want to think past the week, to see the longer pattern beneath the daily story, and to come away steadier rather than more agitated.
That longer view gets built somewhere. On Patreon, essay by essay, I'm constructing The Long Work, a body of analysis meant to outlast the news cycle that prompted it. The readers there make it possible. No subsidies, no strings. The work answers to them.
$8/month to read it as it's built, and to have a hand in building it.