Young people are quickly dropping out of the labour market

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As the Canadian labour market softens, young people appear to be bearing the brunt of the slowdown – and it’s driving many of them out of the work force altogether.

The labour participation rate for those aged 15 to 24 fell to 62.7 per cent in January, down a full three percentage points from last April, according to figures from Statistics Canada. People are considered labour participants when they are employed, or when they’re out of work, available and actively searching for a job.

The plunge has been especially large for young women: Their labour participation rate has ebbed to 62.5 per cent – the lowest level since 2000, not including the worst months of the pandemic – from roughly 67 per cent in early 2022.

The number of youth non-participants has risen by roughly 200,000 over the past year to 1.9 million in total. The Statscan figures show that 6.8 per cent of them wanted work but did not search for a job, up from 5.8 per cent in January, 2023. Of that group, the majority cited school as the reason for not looking. (All figures in this paragraph use a three-month moving average to reduce volatility.)

Even so, it’s a tougher environment for finding work than a couple of years ago. The youth unemployment rate stands at 10.8 per cent – still low by historical standards, but up from 9.3 per cent in summer 2022.

In a recent report, Royal Bank of Canada economists Carrie Freestone and Rachel Battaglia said that students and recent graduates account for a large portion of the increase to the overall unemployment rate.

“The share of younger Canadians with postsecondary education has continued to rise, and hiring demand has softened sharply in industries like professional services and finance jobs where there’s a higher number of recent postsecondary graduates struggling to find a job,” they wrote.

Decoder is a weekly feature that unpacks an important economic chart.