Canada's youth labor market is improving, with unemployment falling to 12.6% in July, but it remains well above the national rate, particularly among teenagers, according to TD Economics in a Wednesday note.
The deterioration reflects weaker labor demand and a sharp rise in youth labor supply, with young workers often hit first by slower hiring and population growth expanding the pool of job seekers, said TD. The impact is especially pronounced among 15- to 19-year-olds, whose unemployment has risen disproportionately.
"The two industries behind most of the recent decline in the youth's share of employment are accommodation and food services and retail trade," wrote TD Senior Economist Andrew Hencic and Economist Maria Solovieva in the note. "Both sectors combine two characteristics: they are among the most cyclical industries in the economy, and they employ the highest concentration of young workers."
Accommodation and food services and retail have shed roughly 25,000 youth jobs since 2019, with retail particularly affected by e-commerce, automation and weaker hiring, added TD. Manufacturing has also continued to lose ground as a source of youth employment.
Artificial intelligence is often blamed, but Canadian data have yet to show a clear link between its adoption and the deterioration in youth employment, according to the bank.
"Slowing labour force growth and a gradual economic recovery should work to unwind the increase in youth unemployment," wrote Hencic and Solovieva.
However, teenagers may continue to face greater challenges as traditional entry-level opportunities become harder to find, said the economists.