Canadian youth unemployment may not be in crisis: TD

The issue of dim job prospects for young Canadians gets a lot of ink by commentators and politicians these days, but a new study by TD Economics says the employment picture isn’t that weak after all.

While the youth (aged 15-24) unemployment rate is higher than it was a decade ago, TD lays much of that on the rocky post-recession economic climate, and says the situation going forward looks reasonably bright.

“A lot of people talk about the youth unemployment rate being elevated and the difficult time the youth are having, but I think it’s a more nuanced picture than that,” says the report’s author, TD Senior Economist Randall Bartlett.

Indeed, it’s a touchy issue. Bank of Canada Governor Stephen Poloz stepped in it last month when he suggested that underemployed young Canadians should consider doing unpaid internships to get experience.

The comment was ripped apart in the media for soft-peddling the financial pressures youth face in a market where the youth unemployment rate is 13.0 per cent, up from 10.9 per cent in pre-recession 2008.

But Bartlett says the rise in the rate – traditionally more volatile than the overall unemployment rate, which is also higher than in 2008 – is not unexpected given the turbulent business cycle over the past six years.

Drilling into the numbers also finds reasons for optimism, as much of the weakness is centered on the lower end of the youth age range, among 15 and 16 year olds, or high-school-age kids more likely to be able to move in and out of the workforce.

Separate them out, and the unemployment rate for the 17-24 group falls by 1.4 percentage points.

He also finds that post-crisis bumps in the jobs market could be leading to a positive effect for youth who give up a fruitless job search and decide to retrain.

“What we’re seeing is that youth, when they encountered a difficult labor market during the recession and afterward, began pursing greater levels of education, and what we’re seeing is that the returns to those pursuits have been positive and significant,” he says.

This, along with the prospect of higher economic growth, means the picture going forward should see that rate continue to come down from the post-crisis peak it hit in 2009.

“ We’re optimistic overall about youth employment opportunities in the next few years,” he says.

The survey also throws cold water on the notion that older Canadians are displacing youth as they re-enter the labor force to supplement meager pensions. While the elderly are increasingly taking up part-time jobs, that is coming largely at the expense of prime-aged Canadians, rather than youth, according to the study.

Bartlett’s one cautionary note focuses on the rise in temporary jobs, which account for nearly early one-third of employed young Canadians, the most of any point since they started tracking the data in 1997. This means more youth are working in short-term jobs with fewer benefits and lower wages.

While the study doesn’t tackle provincial trends, which show pockets of weakness in Ontario and the Atlantic provinces that have politicians scrambling for solutions, Bartlett says the data shows measures to address general skills development and labour market mobility make more sense than policies exclusively targeted at increasingly youth employment.