The kids are not alright, according to a new report from one of Canada’s Big Six banks. Statistics Canada (Stat Can) data shows the youth unemployment rate saw a sharp uptick in July, and has climbed to the highest level since 2010 (excluding pandemic). BMO notes that rising unemployment is typical in a recession, but joblessness this concentrated in young adults is not. The bank warns this isn’t due to a lack of demand for workers, but an excess supply of labour from the massive study permit boom.
Canadian Youth Unemployment Rate Is Soaring Faster Than General Joblessness
Canada’s youth unemployment rate is flying high, delivering a blow to the general economy. The seasonally adjusted youth unemployment rate climbed to 14.6% in July, a 0.4 percentage point increase from the previous month. BMO notes this is the highest rate since 2010, excluding the unusual distortion in the first year of the pandemic. This is very high, though nowhere near the record.
“Before 2020, the highest youth jobless rate was set in 1982 at just above 20%. But that sky-high rate was accompanied by the highest overall jobless rate of the post-war era (13.1%),” explains Douglas Porter, chief economist at BMO.
Rising unemployment is typical of entering a recessionary environment, but this is very different from 1982. Canada’s rising jobless rate is almost exclusively concentrated among young adults.
Canadian Labour Markets Unable To Absorb Youth Population From Immigration Boom
The 36-month percentage change of the youth population (annualized) vs the ratio of youth unemployment to workers 25 years and older.
Source: Statistics Canada; BMO Capital Markets.
BMO compares the unemployment rate as a ratio to highlight just how concentrated the stress has become. “One way to drill down to the specific pressure on youth versus the overall population is to look at the ratio of the youth rate (14.6%) vs the rate for those 25 and over (5.7%), which is now around 2.5:1,” explains Porter.
In plain English, Canada’s young adults—aged 15 to 24 and actively seeking and available for work—are 150% more likely to be unemployed than workers aged 25+. Amplified youth unemployment was fueled by the study permit-driven immigration boom that occurred post-2022.
Canadian Youth Unemployment: A Policy Decision, Not Economic—But It Can Turn Into An Economic Issue
The bank’s above chart shows a clear correlation between the demographic’s population boom and its amplified unemployment rate. Youth unemployment surges follow the rare and rapid growth of the demographic, the latter occurring during Canada’s immigration booms.
“…unsurprisingly, when the youth population swells, it tends to drive up the youth jobless rate relative to others,” he explains.
He further adds, “The past few years have seen extreme growth in the 15–24 category, largely due to the large influx of international students.”
Government documents show policymakers sought to grow aggregate demand by rapidly scaling study permit issuance. As the data shows, it’s easier to raise the number of permits than it is to absorb a flood of new labour. A very real problem, regardless of how many times a “labour shortage” is claimed. It’s not an issue of too much demand for workers, but an excess supply of workers that aren’t being absorbed.
Porter highlights this by rhetorically asking, “In one single 12-month period (to July 2024), the youth population surged by 7.2% y/y—is it any wonder the youth jobless rate then spiked?”
Beyond BMO’s analysis, using immigration as a demand stimulus proved counterproductive, concentrating spending on necessities and diverting capital from other sectors. The result is essentials—especially shelter and food—see amplified price growth while discretionary spending takes a hit.
Since one person’s spending is another person’s income, the problem is likely to spread to other areas. Recent changes to immigration are preventing the problem from getting bigger, but corrections tend to take years—not months.