CIBC report: Youth unemployment surges to recession levels

A recent analysis warns that youth unemployment has climbed to levels usually seen only during economic downturns, even as employment for other age groups has held up better. The report from CIBC highlights a widening gap in the labour market: young people are losing ground at a pace that outstrips what the broader economic picture would normally predict.

CIBC analyst Andrew Grantham points to a pattern in which joblessness among 15-to-24-year-olds typically increases more than among older, prime-age workers when the economy weakens. Historically, youth unemployment tends to rise by roughly four percentage points in such periods, compared with about a two-point rise for prime-age workers. Since 2022, however, the youth rate has climbed substantially more than that historical average — a 5.5 percentage-point increase — while joblessness among older workers has been relatively muted.

Businesses implementing more tech tools, including AI

Grantham suggests that rapid adoption of labour-saving technologies, especially artificial intelligence, is a key demand-side factor shaping the trend. Many of the entry-level positions commonly held by young workers—roles in retail, customer service and basic administrative support—are also among those most exposed to automation and digital tools. For example, the retail sector’s move to expand self-checkout options reduces the need for cashiers, while business and support services increasingly rely on AI-driven solutions to handle tasks that previously required human labor.

On the supply side, the analyst notes that a surge in non-permanent residents entering the labour force between 2022 and 2024 temporarily increased the pool of available workers. That higher supply likely amplified competition for entry-level jobs. But Grantham cautions that this alone does not fully explain the disproportionate weakness in youth employment: the labour market dynamics indicate something beyond a simple shift in worker numbers.

“With population growth decelerating rapidly recently, in large part because of a curbing of student numbers, that supply factor is unlikely to explain the renewed weakening in youth employment witnessed this year,” Grantham wrote in his analysis published Tuesday. In other words, as the influx of new residents slows, that particular pressure on entry-level job supply should ease.

Statistics Canada reported that youth unemployment climbed to 14.6% in July — the highest reading since September 2010 — underscoring how acute the challenge has become for younger jobseekers. Grantham’s early findings point to technology-driven displacement as a major contributor, likely affecting younger Canadians more heavily because of the types of jobs they typically hold.

Despite the current strain, historical patterns of technological disruption offer some reason for cautious optimism. Previous waves of innovation — such as the spread of personal computers and the internet — initially displaced certain jobs but eventually created new roles and industries that absorbed displaced workers. Grantham notes that similar adjustment processes could occur over time with AI and automation, generating different kinds of opportunities even as some traditional entry-level roles decline.

The report does not specify how quickly the labour market might rebalance or when youth unemployment might begin to improve. Much will depend on how fast businesses adopt new technologies, how training and hiring practices evolve, and how demographic trends unfold in the coming months and years.

For students and young people navigating this environment, the report highlights the importance of transferable skills, digital literacy and work experience that align with shifting employer needs. While some traditional entry-level positions are being reshaped, employers continue to value adaptability, problem-solving and roles where human judgement and interpersonal skills remain essential.

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