'Worrying trend': Youth unemployment rate in Canada increased by 5.5 percentage points since 2022 — and AI is a factor, says CIBC
The rate of youth unemployment in Canada has reached levels beyond what could be expected, according to a recent report.
The unemployment rate for Canadians aged 15 to 24 has risen by more than 5.5 percentage points since 2022—far exceeding the average increase seen during previous periods of economic weakness, CIBC reported.
“The most recent step up has taken unemployment to levels typically only seen during recessionary periods, and has come in contrast to a surprisingly resilient labour market for other age groups,” said Andrew Graham, senior economist at CIBC, in the report.
“Moreover, there’s no evidence that the 15-24 unemployment rate is being exaggerated by increased labour market participation. Indeed, if anything, the employment-to-population ratio shows an even more worrying trend.”
One of the reasons why youth unemployment in Canada is so high is the sheer number of young people in the country entering the employment age, according to a previous report from BMO Economics.
Graham, however, noted that the surge in youth unemployment is not solely the result of a weakening economy. While population growth, particularly among non-permanent residents and students, has contributed to a larger labour supply, it does not fully explain the sharp rise in joblessness among young people.
Artificial intelligence factor in youth unemployment
The CIBC report highlights that technological change, including the adoption of artificial intelligence, is playing a significant role in the current employment landscape.
Graham notes that—based on a 2024 research paper from Statistics Canada—in sectors that have a high (or above average) exposure to AI, more than 30% of roles have “high exposure” but also “low complementarity” to AI.
“Using employment data by sector and age, youth employment is struggling much more than other age groups in sectors defined as having high AI exposure. That’s not the case in sectors with low exposure, and so this isn’t an economy-wide issue,” he said.
“Sectors with high exposure to AI—such as retail, business and support services, and professional and scientific services—have seen a disproportionate decline in youth employment. Automation and new technologies are replacing many part-time and entry-level jobs traditionally filled by young workers, further intensifying the challenges they face.”
Despite these difficulties, Graham suggests there is reason for cautious optimism.
“The good news is that the factors driving youth unemployment higher at present shouldn’t last forever. Population growth, particularly among non-permanent residents, is already slowing, meaning less incremental supply needing to be absorbed into the labour market. And while new technologies, including AI, may be limiting demand for some student and entry-level roles, that same demographic group is most likely to work in fields using that technology and unlocking productivity benefits from it in the future.”
Youth unemployment remains a significant challenge in the global labour market, according to the International Labour Organisation's (ILO) World Employment and Social Outlook: Trends 2025.
And in Canada, failure to address its youth unemployment crisis will cost the country $18.5 billion in GDP by 2034, according to a previous report by Kings’ Trust and Deloitte.
