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This transcript has been generated using machine learning technology. While this technology was trained with CIBC terminology, it may contain errors.
Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I&#8217;m your host Lisa Raitt and in this podcast I&#8217;m going to share insights on current hot topics in the areas of public policy, politics and business, with some guests along the way. And welcome back to The Raitt Stuff. You know, I have two kids who are in their twenties now. JC is 24 and Billy just turned 21. And they and their friends are finding it really difficult right now to not only find that first job to build a career, but finding any kind of employment this summer. So that&#8217;s why I&#8217;m delighted to have with me today a colleague of mine, Andrew Grantham, who&#8217;s a senior economist in CIBC&#8217;s economics team. He&#8217;s actually in his 14th year with CIBC and he&#8217;s leading our work in the Canadian Economic Outlook. Now, why Andrew is a good guest today for my issue is because he recently published research on the struggles of Canadian youth unemployment, and it raised a lot of important themes that I know that our clients care about for their businesses, but also for their own personal lives. So I wanted to talk to Andrew about this study in more detail today. So Andrew, thank you very much for agreeing to come on The Raitt Stuff and help me with my personal problem.
Andrew Grantham: Thank you for having me and as someone whose eldest kid is now turning 14, I&#8217;m kind of worried about this for the future as well.
Lisa Raitt: There you go. I agree with you. It&#8217;s nothing like bringing it close to home when it&#8217;s an important issue for your family. And I&#8217;m running into so many families who have the same kind of questions. Now, I wouldn&#8217;t say that there was a lot of debate around your paper, because I don&#8217;t think it was debate. I think there was a lot of interest around your paper. And it made it through to even mainstream media with Morning Talk Radio talking about this issue. Tell us a little bit about your findings and specifically, what is the thing that surprised you the most in the trend in youth unemployment in the past couple of years?
Andrew Grantham: So think what&#8217;s the most surprising and worrying thing is just the extent, the magnitude of how much the unemployment rate for young people has risen. Now, in context, the broader economy since 2022 has weakened, the overall unemployment rate has gone up. But what we&#8217;ve seen for the youth unemployment rate goes above and beyond what we would have expected given what&#8217;s happening in the rest of the economy. Now, traditionally, young people do fare worse under a weakening economy because when they are entering the labor market, if the economy is weak, people are not hiring. They are the new flow into the labor market. And so their unemployment rate always goes up more than other age groups. But what we&#8217;ve seen this time around is that we&#8217;ve seen roughly about a 2 % increase in unemployment for other age groups. Typically, that would see youth unemployment rise by about 4%. Typically, the ratio is normally about double, two times what other age groups are seeing. This time around, though, the youth unemployment rate is around 5.5 % higher than it was in 2022. We&#8217;re near the levels that were seen just after the financial crisis, the kind of recessionary levels. And so that&#8217;s almost three times the increase that we&#8217;ve seen in those other age groups. So it&#8217;s really the magnitude of the rise in the unemployment rate for young people, not the fact that it&#8217;s gone up, just how much it has gone up, which is the real surprise.
Lisa Raitt: Do you think that immigration has had any impact on the youth labor market?
Andrew Grantham: I think it has. To figure out how much it has impacted is very, very difficult. But, whenever you talk about anything in economics, there&#8217;s always supply and demand. You can&#8217;t just focus on one area. And certainly what we&#8217;ve seen over the last two to three years, and particularly up to around the middle of last year, is we&#8217;ve seen not just a weakening in demand, but we saw an increase in the supply of labor because of immigration, because of the rise in the number of non-permanent residents. And obviously a lot of the non-permanent residents were students. So that&#8217;s a lot of young people coming into the country, entering the labor market, looking for jobs at the time where demand for those jobs was coming down because interest rates had gone up and we were slowing the economy. Trying to figure out whether that explains all of the excess unemployment that we are seeing is difficult, but our research suggests that it can&#8217;t. Yes, it can explain some of the excess unemployment for young people, but if you think about just what we&#8217;ve seen over the last year, we&#8217;ve seen some caps on student numbers, we&#8217;ve seen population growth slow down, including for young people, yet we&#8217;ve seen the unemployment rate continue to go up. Maybe it can explain most of what we saw between 2022 and the middle of 2024. It can&#8217;t really explain what we&#8217;ve been seeing over the last year. So we think that there&#8217;s kind of something else going on in the background as well as just that supply store.
Lisa Raitt: Do you think that Canadian youth are experiencing this out of proportion with either European youth or American youth?
Andrew Grantham: So it&#8217;s interesting. So what we&#8217;re seeing globally is that even in labor markets that haven&#8217;t weakened as much as the Canadian labor market. So we think about the US, for example, the US up until fairly recently was a fairly solid labor market. The unemployment rate hadn&#8217;t risen very much relative to where it was in 2022. Yet even there, the youth unemployment rate is 2 % higher than it was a few years ago. So even in the US and in other countries around the world, including countries in Europe, this youth unemployment is becoming an issue. And so that also is evidence that it&#8217;s not just a supply and immigration and non-permanent residence story, because it is happening in other countries that haven&#8217;t seen that big excess in population. So there does seem to be some demand issue there. And one of the things we looked at is where the technological change, including AI, is potentially low in the demand for some either part-time work or those kind of entry-level positions that new graduates take up.
Lisa Raitt: So I was gonna ask you about AI because I&#8217;m wondering if going into the future, is that something that you as economists are taking into consideration and trying to sort out what the best policy prescriptives are to fix this problem?
Andrew Grantham: Yeah, so we&#8217;re trying. The research is in its youth, I think, just like the youth unemployment, the research into AI and the impact on the labor market is in its early stages. What we are seeing at the moment, and the definitions of AI can differ from paper to paper. One of the definitions that we looked at when we looked at a breakdown of employment within Canada was given to us by Statistics Canada in a paper a year or so ago that included areas such as business services that are using AI to do some research, PowerPoint presentations, that sort of thing. It did also include areas such as retail and the use of self-checkouts, which I wouldn&#8217;t necessarily say is AI, but more kind of just technological change. But when we look at the sectors that they deem to be the most at risk from that technological advance or AI. It does seem to be those sectors where youth employment is lagging behind employment in other age groups the most. So I do think that there is some evidence, some early evidence at least, that the part-time jobs that are typically undertaken by young people, for example, in supermarkets, in other stores. the new entry level jobs that they typically undertake in business, professional services, even finance, dare I say, are being replaced to a certain extent by AI and they are lagging behind what we are seeing in other age groups and in other sectors of the economy.
Lisa Raitt: Yeah. Right now, people are getting ready to go back into the House of Commons in Ottawa. The prime minister is consulting with his cabinet. He&#8217;s consulting with his caucus and he&#8217;s consulting with economists and all kinds of other people are giving him advice. What kind of policy action or intervention do you think would be most helpful in order to improve the job prospects for young Canadians?
Andrew Grantham: So when we talk about trying to improve the job prospect for the youth, those 15 to 24 year olds, the first thing is even though we&#8217;ve discussed this excess unemployment relative to what is typical for that age group, most of the increase that we have seen still since 2022 is actually due to a weakening economy. So I mentioned earlier that the youth unemployment rate normally rises two times as much as other age groups. This time it&#8217;s been three times, but that two times is still because of the weakening economy. So anything we can do to try and spur economic growth, whether that be through fiscal policy or whether that be from the Bank of Canada, which we think should be and will be soon, hopefully, interest rates a little bit further, that will help young people, that will help their job prospects. When it comes to the supply issue, we&#8217;ve already seen immigration policy change. That should in the future have a beneficial effect, less supply, hopefully more demand, that should balance the labor market a bit better. But in terms of that excess that we are potentially seeing from AI and technological change, that&#8217;s going to be the difficult aspect. And I think part of this has to come down to convincing companies that what they are doing today may not be the best thing for their future. So for example, if they are replacing an entry level job today by using technology to do the grunt work, do the research, do the PowerPoint presentations that they otherwise would have been doing, that&#8217;s all well and good. That will help reduce their costs, increase their productivity in the near term. But that disrupts the pipeline for your future employment, the people that you will need to replace you when you hopefully move up the chain and get promoted in the future. So I think, it&#8217;s part of that education process that we still need to have the on the job training for young people because they are obviously, as we all know, the workers of the future for those other roles.
Lisa Raitt: Really appreciate that, Andrew. Can you give us any words on the general economy right now, how you&#8217;re viewing it and what you&#8217;re seeing for the quarter?
Andrew Grantham: So for the economy overall, as I mentioned, it&#8217;s not just young people who have seen a rise in their unemployment rate. It is other age groups as well. Maybe not as much as youth unemployment, but other age groups have seen an elevated unemployment rate. That suggests to us that there&#8217;s plenty of room for us to stimulate the Canadian economy to bring the unemployment rate down, to grow the economy. What we in economics call the long run potential of the economy in order to kind of use that excess labor that we have. It&#8217;s just a case of getting the policy right and honestly hoping that there&#8217;s nothing, no big surprises come from the US that will disrupt that. So in our forecast, we do expect a return to growth for the Canadian economy in the second half of this year. We do not expect a technical recession of two negative quarters. And by 2026, our hope is that some further interest rate cuts from the Bank of Canada, maybe some further fiscal stimulus from the federal government can help us accelerate growth and bring the unemployment rates, not just for young people, but for everybody, down in 2026.
Lisa Raitt: Great. And Andrew, where can people find more information and research from your department?
Andrew Grantham: So our research is actually freely available on our website, CIBC Economics, so you can just Google that and you should be able to find it pretty easily.
Lisa Raitt: Excellent. And what&#8217;s your next piece that you&#8217;re working on? Give us a prelude.
Andrew Grantham: So actually working on, so you asked about the broader economic outlook, we&#8217;re looking at updating what we call our forecast publication. So that just gives an overview of our full forecast. And then after that, I think it might be something to do with the federal government fiscal policy, given that we will be coming up to a budget next month, I guess now, because it is September already.
Lisa Raitt: I would say November for a budget, but I&#8217;m just guessing as well. We&#8217;ll have to see how they do. And as the prime minister has said, it&#8217;s going to be an austerity budget. So we&#8217;ll have you back on and we can talk about it at that point.
Andrew Grantham: Excellent, that&#8217;d be great.
Lisa Raitt: Thank you so much, Andrew, for joining us today.
Andrew Grantham: Thank you.
Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at lisa.raitt@cibc.com. Your interactions actually will make this better. I&#8217;m your host, Lisa Raitt, and this has been The Raitt Stuff.
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The kids are not alright

CIBC Economics

Lisa Raitt

Vice-Chair, Global Investment Banking

CIBC Capital Markets

Andrew Grantham

Senior Economist

CIBC

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