Introduction to Youth Unemployment in Canada
The youth unemployment rate in Canada has seen a significant increase, reaching its highest level since 2010, excluding the pandemic years. According to data from Statistics Canada, the seasonally adjusted youth unemployment rate climbed to 14.6% in July, a 0.4 percentage point increase from the previous month. This issue is particularly noteworthy because it is concentrated among young adults, a trend that is not typical in a recessionary environment.
Understanding the Youth Unemployment Rate
To put this into perspective, the highest youth jobless rate before 2020 was set in 1982 at just above 20%. However, that high rate was accompanied by the highest overall jobless rate of the post-war era, which was 13.1%. The current situation is different because the rising jobless rate is almost exclusively concentrated among young adults. Douglas Porter, chief economist at BMO, explains that before 2020, the highest youth jobless rate was accompanied by a high overall jobless rate, but this time, the situation is unique.
The Impact of Immigration on Labour Markets
The labour market’s inability to absorb the youth population from the immigration boom is a significant factor contributing to the high youth unemployment rate. The 36-month percentage change of the youth population (annualized) vs the ratio of youth unemployment to workers 25 years and older 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, which has occurred during Canada’s immigration booms.
Policy Decisions and Economic Implications
The study permit-driven immigration boom that occurred post-2022 has fueled the amplified youth unemployment. The bank’s analysis shows that government policies seeking to grow aggregate demand by rapidly scaling study permit issuance have led to an excess supply of labour that isn’t being absorbed. This is not an issue of too much demand for workers, but rather an excess supply of workers. Porter highlights this by 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?"
Economic Consequences and Future Outlook
Using immigration as a demand stimulus has proven counterproductive, concentrating spending on necessities and diverting capital from other sectors. The result is amplified price growth for essentials like shelter and food, 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 policies are preventing the problem from getting bigger, but corrections tend to take years, not months.
Conclusion
In conclusion, the youth unemployment rate in Canada is a pressing issue that requires attention and effective policy measures to address. The concentration of unemployment among young adults, fueled by the study permit-driven immigration boom, has significant economic implications. Understanding the causes and consequences of this issue is crucial for developing strategies to support young Canadians in their job search and to ensure a more balanced labour market. By acknowledging the role of policy decisions in shaping labour market outcomes, policymakers can work towards creating a more sustainable and equitable economic environment for all Canadians.
