Priced out of housing and now facing an eroding labor market, Canada’s young adults can’t catch a break. A new report from National Bank of Canada (NBF) warns that unemployment is on the rise across the country, but it’s surging for young adults (15 to 24 years old). The demographic is seeing unemployment rise much faster than anticipated—at a pace not seen outside of the financial crisis. It isn’t likely to improve in the short-term either, according to the typically bullish bank.
Canada Has Seen An Unusually Sharp Rise In Youth Unemployment
Source: NBF.
Canadian unemployment is generally rising, but young adults are carrying most of the burden. The general unemployment rate has climbed 1.6 points since hitting a record low in 2022, a substantial increase. However, young adults saw the rate advance more than double that, adding 4.2 points to hit a rate of 13.6% in June. About 1 in 7 young adults are unemployed and unable to find work, despite being “ready, willing, and able.”
Canadian Youth Unemployment Hasn’t Increased This Sharply Outside of A Financial Crisis
Source: NBF.
If the current youth unemployment rate seems like it made a sharp climb, that’s because it did. NBF economists modeled the rise based on the previous recessions, and the current trajectory is rising 2 points faster than expected.
“In other words, the current rise in youth unemployment is disproportionate to historical norms…,” explains Matthieu Arseneau, deputy chief economist at NBF.
He further implies the increase isn’t just unusually fast, but it’s never accelerated at such a rate outside of a crisis. “The total increase is beginning to approach the cumulative rise recorded during the 2008-2009 financial crisis, and the speed of increase in recent months is similar to that of past recessions,” he explains.
The problem is broadly seen across the provinces, but amplified in Ontario. NBF explains this is due to the concentration of young immigrants arriving in the province. Since they compete for similar experience-building roles, the decline in vacancies and “oversupply” of labor is amplifying concerns in the province. The bank estimates more than half of youth unemployment is located in the province.
Canadian Youth Unemployment Unlikely To Improve Soon, Job Vacancies Contract
Economies tend to run in cycles, and periods of prosperity are routinely followed by downturns. With virtually every policymaker boasting of the economic strength in the country, this has got to be a temporary issue that will subside in the next few employment reports, right?
NBF isn’t so optimistic. They cite rising vacancies, explaining the “…vast majority of sectors are overstaffed.” Declining per capita output indicates people are producing less and less, and that is most likely to lead to layoffs. Once again, a burden that tends to fall on younger adults and less experienced workers.
“Unfortunately, we are not confident that hiring prospects will improve any time soon.” explains Arseneau.
Falling rates aren’t expected to bring enough stimulus to soften the blow in the near term either.
The NBF report further reinforces earlier data that suggests headwinds are approaching. Earlier this year, the Bank of Canada (BoC) warned that unemployment is expected to rise, and most of the increase will be felt by young adults. Young adults can’t win these days, eh?
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