Canada’s oldest bank has a message for investors and policymakers: “kids are not alright.” BMO economists are warning investors that the youth unemployment among those aged 15 to 24 has been rising aggressively, and remains at recession levels in June. The issue isn’t that of job losses, but the population growing faster than the economy can add jobs over the past few years. Now with immigration restored in line with historical levels, things are moving in the right direction—but it will take a long time to reverse the recent damage.
Canada’s Youth Unemployment Rate At Recession Levels
Canada’s youth unemployment rate is significantly elevated from historical norms. The youth unemployment rate climbed to 14.2% in May, and despite the general unemployment rate falling in June, the youth unemployment rate remained unchanged. That means 1 in 7 young adults is unemployed, not in school at the time of survey, and actively seeking employment.
“How’s the summer job market? Not so good. Canada’s youth unemployment rate was probing more than decade highs ahead of the June employment report,” explains BMO senior economist Robert Kavcic. “At more than 14%, we’re currently still seeing that rate at recession-like levels.”
Canada’s Not Losing Jobs, Just Can’t Keep Up With Population Growth
Canada’s employment problems are unique in the sense this isn’t an issue of creating new jobs. The bank notes annual growth of youth employment (+1.1%) has lagged general employment (+2.8%), but jobs are still being added. However, the youth labor force grew 7.8% over the past two years, helping to push the segment’s unemployment rate a staggering 5 percentage points higher over the same period.
“This is not a participation story (youth participation has actually fallen notably); it’s more of a population growth story,” explains Kavcic.
Canada Slowing Immigration Will Help, But It Will Take Time
That was the bad news. The good news is we’re starting to see a better balance and that will help in time. June data didn’t show an improvement for the youth unemployment rate, but the balance between population growth and jobs created improved. An annual job deficit remains, indicating the population is still growing faster than jobs added.
However, it’s beginning to improve as policymakers correct their population growth strategy to more historically normal volumes. Canada has always been known for robust immigration-driven growth policies but post-2021, the targets were ambitiously scaled up to unsustainable levels.
“With immigration caps now in place, namely on students and non-permanent residents, look for a gradual rebalancing of conditions in the youth job market—it’s just going to take a while,” explains Kavcic.
Youth unemployment is often ignored at the macro level, with more focus on the general rate. In recent years, economists have begun to state this is a mistake—as young adults contribute differently to the economy than older workers.
A delayed start to employment can impact household finances, demographics and the economy in general. This also means delaying milestones such as buying a home or car, or starting a family—three important pillars that help support the stability of a national economy.