The current elevated level of youth unemployment is largely reflective of the overall weakness in the labour market as younger workers bear a larger share of the slowdown. However, the rise in unemployment among teenagers is less explained by the overall state of the labour market and likely reflects additional factors, according to a report by TD Economics.
The unemployment rate for Canadians aged 15 to 24 has fallen from 14.6% last September to 12.6% in July. Yet despite that improvement, the gap relative to the overall unemployment rate remains wide, suggesting that younger workers continue to experience a much softer labour market.
Sectoral evidence shows that employment weakened most in industries that traditionally employ younger workers. More broadly, changes in workplace organization are likely limiting opportunities for entry-level jobs, said the report.
Rapid population growth amplified the cyclical pressure by expanding the labour force. As labour force growth slows and the labour market recovers, much of the recent increase in youth unemployment should unwind, it added.
"Canada’s rise in youth unemployment is largely in line with what would be expected given the state of the labour market for older workers, with the deterioration hitting the youngest workers hardest. Importantly, both the large rise in labour supply and softer labour demand worked together to worsen conditions. Nonetheless, as we have seen in recent months, slowing labour force growth and a gradual economic recovery should work to unwind the increase in youth unemployment," said TD Economics.
"Not all of it fits a perfect story. Teenagers continue to underperform the historical relationship with the broader labour market, and some of the industries that have traditionally provided first jobs appear to be offering fewer entry points than before. Moreover, artificial intelligence’s future impacts on the demand for entry-level work remain an unknown. Canadian data do not yet reflect a compelling case that its impacts are being felt, but coupled with the rise of remote work, it may yet another headwind for young people in the labour market in the years ahead."