One of Canada’s largest banks is finally willing to admit there’s a supply problem, but it’s not the one you think. BMO wrote to investors today, warning that Canada’s youth (15-24 years old) unemployment rate is surging much faster than anyone anticipated. The crisis-style growth has left 1 in 7 young adults struggling to find work in a rapidly eroding labor market that’s set to get worse. Compounding the issue is the surging population, which has led the young adult population to grow much faster than any economy can create jobs.
Canadian Youth Unemployment Is Ripping To Crisis-Like Levels
Canadian youth unemployment is exploding. The unemployment rate climbed to 14.2% in July, the highest non-pandemic rate in over a decade. Many don’t appreciate just how astronomically high that rate is—1 in 7 young adults who are ready, willing, able, and looking for work, can’t find a job. That doesn’t include the ones in school full-time, who aren’t considered ready to work from a stats perspective.
According to the bank, young adults returning to school have it the worst. Stat Can estimates unemployment for this group hit 17.2% in July, the highest non-pandemic rate for July since 2009. That’s deep recession performance at a time when the government is boasting of how the economy is forecast to outperform its G7 peers. It’s probably not uncommon to be skeptical of the outperformance.
The bank emphasizes that prime-aged workers (25-54 years old) have only seen their unemployment rate rise at nearly half the rate. The rate is starting to climb but sat below 6.0% in June.
Canada’s Young Adult Population Is Surging, & They Can’t Find A Job
The bank attributes this to several reasons, including how Canada’s cities have evolved. “Part of the challenge is that many service businesses went through a generationally difficult shock during the pandemic and some dislocation persists,” explains Robert Kavcic, a senior economist at BMO Capital Markets.
He adds, “… but it mainly reflects labour force saturation from historic immigration—namely lower-skilled temporary foreign workers and international students. Youth hiring has slowed (+0.2% y/y), and the participation rate has fallen.”
For those unaware, a falling participation rate means labor is withdrawing from the market. Young adults drop out of the labor market for various reasons, but persistent unemployment was a problem that occurred post-Financial Crisis in the US. These are workers who have been unemployed for so long they’ve simply given up on searching for work. A less-than-ideal use of future labor, but one that is common in economies persistently driven by monetary stimulus, such as Japan after its 90s real estate crash.
What happened to the labor shortage that Canada supposedly had with record stimulus back in 2021? It was followed by a record surge of population growth as immigrants were sold on an abundance of jobs in an economy that was supposedly growing quickly. Those immigrants are now finding themselves in a similar situation, competing with domestic young adults who are also struggling to find a job.
Source: BMO Capital Markets.
“…But before we start calling kids lazy, note that population in that cohort has exploded by almost 12% in the past two years. No job market could ever be expected to absorb such an influx, and this one certainly isn’t either,” explains Kavcic.
Last week we heard of a similar note sent to investors from National Bank of Canada (NBF). The bank warned Canadian youth unemployment is rising at a rate not seen outside of the global financial crisis. While the narrative from organizations like the IMF have Canada preparing for a soft landing, some of the fundamental indicators don’t quite align with that. Though a crisis never occurs when it’s expected, it’s the ones that policymakers miss that land.
Everyone has to admit it IS funny to see the gov boast of how the population is growing faster than any other country. I bet no other country is also producing 1 job for every 4 people the population grows by, and more than half of those jobs are just processing new people.
Normally an economy is growing so fast they need people. Canada thinks it can skip to the people.
Just like home prices tbh. NYC had to grow its economy to the size of Canada to justify the prices as a world class city.
Canada thinks all of its cities can just skip the whole building an economy part—Toronto will just be world class based on charging NYC-level prices for condos.
A country where the kids can’t find jobs or afford housing, but the old people can retire. Perfect plan, I can’t imagine why anyone is upset.
I really do feel bad for kids, but this is what they get for not voting. If you’re not going to vote, prepare to have a government that doesn’t serve you, but serves the people that did vote.
Enjoy paying rents.
15 to 17 year olds can’t vote now and couldn’t have voted in the last election.
They can’t stop Marc Miller from giving away student visas like candy to bald and middle aged pot bellied men from certain countries.
I know Stats Can does that demographic for labour stats, but that’s the least likely to actually be considered statistically unemployed since they ned to not be attending school to be considered unemployed. I imagine in Canada, kids are still going to high school.
Can we expect a surge in private mortgages—no income, no problem!
Things are getting messy. I wonder how we plan to navigate this one.
This nonsense of going to an overpriced daycare like university is the root cause. Young people should learn how to dig and hammer and actually work and make huge money building houses for all the students. Get into UNION Construction. Failing that, get a job in non union construction and organize the bastards.
Don’t blame the foreign workers who are being expoited. Blame the system that’s enabling this.
We know we’re being lied to and numbers are being fudged. The policies in place are by design and causing a world of hurt . As a new senior (60) it breaks my heart to see the youngers in such distress. We had no problem finding summer jobs and even after school jobs. They were abundant. When Canada allows 720k work visas with 420k jobs, disaster will certainly ensue.
I myself think that Canada can be a superpower if they further accelerate the population growth. Canadian youth have it easy compared to their counterparts in Italy, France, Spain or even the UK. (the countries they like comparing themselves too)
Little bit further rise in unemployment is not as big a problem as people are making it out to be if it leads to Canada having 100 million people (and thus becoming a lot more influential in the world) by 2060-70. Instead of the century initiative, they should have the double century initiative by 2100.
Also, young people sacrifice a lot for old people in other economies like India and China. What we are doing here is just formalizing their system macro-economically. Not as big a problem once you make them think of it as their duty. And it is their duty. Many more tax-paying foreign workers will also keep the pension and benefit system for older citizens who need it the most in these difficult times.
It’s true. All the best slums in the world see major population growth before they go through a 50-year stagnation and fall to the bottom of the pile.
We know that numbers are being fudged. Big Banks don’t lie when it comes to actual boots on the ground numbers. Migrants are being lied to. The public is being lied to. The policies in place are literally destroying this country. We need a change by the time that happens if it does, the damage will be far reaching and perpetual on some levels. Canada will never be the same.
WOKE CHANEL
It’s incredible! We bring in thousands at government expense to take these jobs that supposedly can’t be filled otherwise, which raises housing costs and demand. And now we have massive unemployment in the youth sector….duhhh
Canada needs to increase immigration because of the labor shortage. More international students are also needed.
BMO in Sudbury
For over 100 years BMO has taken out Millions of dollars but has invested very little in Sudbury and it is obvious that they are going to maintain this policy.
BMO knows what the problem is. What is BMO going to do about solving this problem?
Please note I can suggest a number of ideas.
Ron Romanko
I am a “color blind” person. But the claim bring in East Indians because they are the only ones who willing to take jobs at Tim Hortons, MacDonald etc. is totally untrue, I stated that based on my own pain looking for work.
The doctors and the governments are telling our young people they are all ill? My kid thinks she is sick because she is stressed went, she looks at the next 35 years of going to work (she is 36). Who wasn’t? Dr says it’s a disorder? Anxiety, depression and of course PDST? Never in the military? But has every sickness out there? Pills and more pills and of course can’t work? Most of her friends are the same. Why are we telling our youth they are sick, kick them in the butt and tell them to grow up? False heath problems and stopping them from believing in themselves.
When everyone was singing buy buy buy prices going to double from $1ml to $2mil double prices for the houses going through the roof. I thought, you gotta be kidding me, I didn’t know it would be possible to pump housing like stock market…well you obviously can, the realtors, gov, investors,crea…blah blah blah. No stopping the train wreck now, its left the station long time ago! LOL 50% haircut by 2026. I was calling this house crash from 2022.. I was alittle to early. Anyways…get your popcorn ready!
Why is it I can put an ad on Indeed looking for front counter reception person $20.00 per hr. And have over 100 applications 20 get get called for confirmed interview and 2 show up ??? This is an ongoing problem.
So when you get a govt that is trying to kill their primary industry (resources) and then replace that industry with govt jobs, corporate welfare, and massive immigration to keep wages low, guess what you get? A disaster.
Add to that an inflation spiral caused by a speculative housing bubble, record levels of consumer and govt debt which will 100% of the time create a wave of inflation? Well you end up here.
To be honest, anyone around for,Trudeau’s dad’s time would recognize the same behavior, same economic conditions, same gdp killing nonsense, and the same transfer of wealth to liberal elites in eastern Canada.
The problem is it took 25 years of austerity to undo the mess his father caused, and it will take at least as long to fix this. Remember both times the USA was outperforming by doing the opposite of what Trudeau sr did?
You can’t do what this govt has done and not create a disaster. It’s just not possible.
My stepson dropped out of the Canadian labour force in May to go back to Europe. He is 21 years old and I am not sure if it will be a holiday for him or a permanent change. Living in a country with a declining real GDP per capita is a tough sell for young people who haven’t really started their careers and own no property.
I notice some of the comments say that the job numbers are fixed, and of course, as Daniel Wong has previously pointed out, they are fixed in at least important way: a foreign student who loses his part-time job here doesn’t count as unemployed, even if he would rather have a job. He is just one more person who has withdrawn from the labour force, even though he hasn’t really done so.
Note that the economy had to grow by at least 4.58% on annualized rate in July, just to keep real GDP per capita from declining in that month. Our social engineering government has made steady growth in real GDP per capita all but impossible.