TORONTO - A recent report highlights a troubling trend in youth unemployment rates, currently reported at levels typically observed only during economic recessions. This contrasts sharply with the relative stability seen in the employment of other age groups within the labor market.
According to CIBC analyst Andrew Grantham, the jobless rate among those aged 15 to 24 has escalated beyond what the prevailing economic situation would predict. Traditionally, during periods of economic downturn, the youth unemployment rate tends to rise about four percentage points. In comparison, the unemployment rate for prime-age workers generally sees only a two percentage point increase. However, since 2022, the youth unemployment rate has spiked by 5.5 percentage points, whereas workers in core age groups have experienced a less pronounced rise in joblessness.
Grantham indicates that the growing prevalence of artificial intelligence (AI) plays a significant role in this imbalance. The types of jobs that young individuals typically occupy are also those most vulnerable to technological disruptions. Additionally, an influx of non-permanent residents between 2022 and 2024 has contributed to the overall labor force, but Grantham emphasizes that this increase alone cannot account for the extensive weakening seen in the labor market for youths.
Recent statistics from Statistics Canada reveal that youth unemployment reached 14.6 percent in July, marking the highest level since September 2010. Grantham highlights early data that suggests the impact of AI and other labor-substituting technologies is likely to disproportionately affect younger Canadians seeking employment. For instance, the retail sector is identified as a significant contributor to high unemployment figures, with retailers adopting self-checkout systems, while businesses in support services increasingly utilize AI technologies.
Despite the concerning trends in youth employment, Grantham reassures that these factors contributing to the labor market's weakness are not expected to be permanent. He notes that population growth has already begun to decelerate, particularly among non-permanent residents, indicating that there will be less incremental supply to absorb into the workforce.
Grantham draws parallels to earlier technological advancements that caused job market upheaval, such as the emergence of the personal computer and the internet. He indicates that while these periods resulted in initial job losses, they were ultimately offset by the creation of new jobs in different sectors over the long term.
The report does not provide a timeline for when these trends in youth employment might begin to improve, leaving uncertainty for young job seekers in the current economic climate. As policymakers and economists examine the factors influencing youth unemployment, the role of technological change and demographic shifts will be central to understanding and addressing the challenges faced by this vulnerable segment of the labor market.
