Youth Unemployment Skyrockets To Recessionary Levels, Raising Alarm For SMB Hiring

Canadian youth unemployment has climbed to levels typically only seen during recessions, with small businesses facing the prospect of tighter recruitment pipelines and entry-level hiring challenges.

Youth unemployment in Canada has risen more than 5.5 percentage points since 2022, far outpacing the increases seen in other age groups, according to CIBC Capital Markets. The jobless rate for those aged 15 to 24 is now at levels “typically only seen during recessionary periods,” the report said.

The rise comes despite resilience in the broader labour market. The employment-to-population ratio for young people has fallen sharply, underscoring what CIBC called an “even more worrying trend.”

CIBC found that the challenges vary by age within the youth cohort. Teenagers are struggling to secure part-time work, a shift that may reflect fewer opportunities in retail, food service and hospitality — sectors that have traditionally provided a first step into the workforce. For many small and medium-sized businesses, those roles have long been essential for meeting seasonal or frontline staffing needs.

Young adults in their early twenties are facing a different problem. The number of full-time jobs available has declined, pushing more 20 to 24-year-olds into part-time roles. While this may help them stay attached to the labour force, CIBC warned that relying on part-time work rather than career-track jobs could delay earnings growth and skills development. For SMBs, it could also mean a more fragmented candidate pool, with fewer applicants ready to step into permanent, full-time positions.

CIBC noted that Canada’s rapid population growth between 2022 and 2024, particularly among non-permanent residents, added pressure to the youth labour market. The impact was even stronger among younger workers, whose unemployment rate rose faster than the general population.

That supply effect explained more than half of the excess youth unemployment relative to other groups. But with student-driven population growth now slowing, CIBC said other forces — including technology — are increasingly behind the latest uptick.

AI and automation are reshaping youth employment

Early data suggests automation and artificial intelligence are displacing entry-level and part-time jobs. Retail, business support and professional services — sectors with above-average exposure to AI — have seen the steepest declines in youth employment. By contrast, industries with lower exposure to AI have not experienced the same trend.

A Statistics Canada study cited by CIBC found that in high-exposure sectors, more than 30 per cent of jobs were considered “high exposure” but offered “low complementarity” — meaning tasks were more likely to be replaced than supported. The report said automation and new technologies are replacing many part-time and entry-level jobs traditionally filled by young workers, further intensifying the challenges they face.

Small and medium-sized businesses often rely on young workers for frontline, seasonal and entry-level roles in retail, hospitality and customer support. A shrinking pool of job-ready youth could mean longer vacancies, higher training costs and added competition for skilled candidates.

For employers that typically turn to students and graduates to fill staffing gaps, the combination of oversupply in the broader youth labour market and under-availability of suitable roles creates a paradox: more young people are looking for work, but fewer are landing the positions that provide long-term career pathways.

Youth unemployment remains a pressing issue worldwide. The International Labour Organization said in its World Employment and Social Outlook: Trends 2025 report that joblessness among young people is one of the most persistent problems in global labour markets.

The stakes are high for Canada as well. A separate report by King’s Trust Canada estimated that failure to address youth unemployment could cost the country $18.5 billion in GDP by 2034. For SMBs, this longer-term drag on productivity and consumer spending may compound the immediate hiring challenges created by a weaker youth labour market.

CIBC said some of the pressures may ease over time as population growth slows and younger workers adapt to new technologies. Past innovations, such as the rollout of personal computers and the internet, displaced certain roles but ultimately created new opportunities.

Still, with youth joblessness well above historic averages and AI accelerating workplace disruption, the risks for Canadian SMBs are immediate. Without targeted recruitment strategies and training investments, many could find their entry-level talent pipelines under strain for years to come.