What’s Behind Canada’s Spike in Youth Unemployment? New Study Offers Answers

A woman walks past bars on Crescent Street in Montreal on Sept. 30, 2020. The Canadian Press/Ryan Remiorz

Canada’s youth are being squeezed by higher labour costs, automation, and a wave of unemployed immigrants looking for work, pushing youth unemployment sharply upward since the pandemic, according to a new report from Desjardins.

The report comes as the youth unemployment rate for Canadians aged 15 to 24 hit 14.6 percent in July, its highest level since September 2010 excluding the 2020 and 2021 pandemic years, according to Statistics Canada. Canada’s overall unemployment rate rose to 7.1 percent in August, the highest it’s been since May 2016, also excluding 2020 and 2021.

“The youth unemployment rate has risen much faster than the unemployment rate for older age cohorts and is now at a level more commonly seen during a recession,” noted the Sept. 4 report co-authored by economists Kari Norman, L.J. Valencia, and Randall Bartlett.

The report adds that teenagers aged 15 to 19 have borne the brunt of the current unemployment spike, with nearly one in five wanting to work but unable to find a job. For young adults aged 20 to 24, the increase in unemployment over the past three years has been more moderate, rising from 9 percent to 11 percent.

The report also says the actual unemployment rate for youth is as much as 6 percentage points higher than official figures once those who have given up their job search or are still waiting for replies are factored into the statistics.

Part of the reason for the hike in youth unemployment can be explained by Canada’s ongoing economic slowdown, according to the report. Other factors include a growing gig economy of unstable side jobs, higher minimum wage laws pressuring businesses to increase automation, and an inflow of unemployed landed immigrants looking for work. Canada’s population rose from an estimated 38 million in July 2020 to nearly 41.3 million in July 2024, mostly spurred by immigration. The country’s current population is 41.7 million as of September 2025.

“To satisfy surging demand for labour in the early post-pandemic period, work restrictions for non-permanent residents, notably international students, were relaxed. This led to a sharp increase in the population growth of young workers, particularly those ages 20 to 24,” the report observed.

The report adds that if population growth continues to slow down or even declines, the youth demographic is likely to remain especially impacted. “A reduced supply of labour among Canada’s youngest workers should help to better balance supply and demand,” the report said. “This should ultimately bring the youth unemployment rate closer to what we would expect given the state of the economy.”

While retail is still the biggest employer of youth, the report notes that this sector has fallen from employing over 30 percent of youth at the end of 2022 to less than 25 percent in July this year. It also notes a significant impact from AI, which is “rapidly transforming the labour market,” along with upcoming cuts to the federal public sector that “could have an outsized impact on youth.”

In terms of solutions to get more young Canadians working, the report advises stronger collaboration between different levels of government and more links between governments, post-secondary institutions, and employers to provide youth with more of the training and work experience they need to succeed in the job market.

“Youth employment in Canada is shaped by both long-standing structural barriers and recent economic weakness,” the report concluded. “This is in part because of elevated youth population growth and the changing nature of work in sectors where younger workers were historically prevalent.”

While youth unemployment has risen significantly, the average hourly wage of employees aged 15 and older in Canada has risen in recent years. The average was $35.20 per hour in 2024, and after adjusting for inflation, this represents a $1.69, or 5 percent, jump from the 2019 pre-pandemic level.

“Recent gains allowed the median weekly wage of young employees to catch up with inflation,” the report said. “However, it grew at a slower pace than some key expenses such as food and rent, which eat up a disproportionate share of young people’s monthly budgets.”

Conservative Leader Pierre Poilievre has pointed at high taxes, lack of movement on major resource projects, and high immigration levels as the factors behind high unemployment.

Ottawa, meanwhile, offers a number of youth programs including the Youth Employment and Skills Strategy, the Student Work Placement Program, and the Supports for Student Learning Program. The federal government in June announced 6,000 additional Canada Summer Jobs positions on top of the existing 70,000 jobs already being created to help younger Canadians secure jobs.