Canada – Students and new graduates are bearing the brunt of the labour market downturn

• The magnitude and pace of Canada’s rising unemployment rate are consistent with trends observed during past recessions.
• Unlike prior recessions, though, the increase to-date has come without a surge in layoffs – it’s rather taking more time to absorb newly available workers as the population grows rapidly.
• But it’s students and new graduates rather than new arrivals to Canada that have been driving the increase.
• Roughly half of the 0.8 ppt increase in the unemployment rate since April has come from longer job searches for students and new graduates who weren’t previously in the labour force.
• The bottom line: Longer job searches for students and new graduates have been a larger factor behind a higher unemployment rate in Canada to-date than layoffs or new arrivals from abroad. To-date, the increase in unemployment has come without a net decline in employment counts. But the slowdown is not over yet – we look for unemployment to continue to edge higher over the first half of 2024.

Source: RBC Royal Bank