The rapid deterioration in the youth job market is a potentially grim signal for the overall labour market, warns National Bank Financial Inc. (NBF).
In a new report, the bank’s economists note that while young workers typically suffer more than others when labour conditions deteriorate, the current environment is tougher than usual for workers aged 15 to 24.
Indeed, the jobless rate in this cohort has risen sharply — up by 4.2 percentage points — from recent lows. By comparison, the overall rate has increased 1.6 points.
“The total increase [in youth unemployment] is beginning to approach the cumulative rise recorded during the 2008-2009 financial crisis, and the speed of increase in recent months is similar to that of past recessions,” it noted.
These recessionary conditions in the youth job market may represent the “canary in the coal mine” for the overall labour market, the report suggested, “and that after a period of hiring freezes, a wave of layoffs will follow, accelerating wage disinflation.”
As it stands, there are have been relatively few layoffs, despite growing weakness in the economy and in other labour market indicators.
And, it’s unlikely that conditions are going to improve anytime soon, the report suggested — noting that, while interest rates have started to fall, monetary policy is still restrictive, and growth is weak.
For the Bank of Canada, given the importance of youth unemployment as an inflation indicator, NBF said the risk that inflationary pressures will re-emerge is fading.
“This reinforces our view that interest rates will be lowered significantly over the coming months,” it said.
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