Youth unemployment and long-term joblessness point to forces beyond the reach of monetary policy
Canada's labour market is undergoing changes that may be more than cyclical, the Bank of Canada warned.
Nicolas Vincent, external deputy governor at the Bank of Canada in Ottawa, told a gathering of the Centre interuniversitaire de recherche en analyse des organisations (CIRANO) in Montréal that three interconnected trends are raising difficult questions about the economy's capacity to adapt: a persistent "low hire–low fire" environment, rising long-term unemployment, and a worsening jobs outlook for young Canadians.
The stakes, he said, extend well beyond the labour market itself.
"While monetary policy can, to some extent, help the economy transition during periods of restructuring, it cannot compensate for lower supply caused by factors such as trade friction or population aging," Vincent said, according to prepared remarks.
"Moreover, if we were to stimulate demand when the issue is more structural, we could create inflationary pressures while also delaying necessary restructuring in economy."
A job market with less movement than it appears
Canada's unemployment rate has remained relatively contained over the past year, hovering between 6.5% and 7% as the country absorbs the effects of US tariffs, according to Statistics Canada. But Vincent argued the headline figure obscures important dynamics playing out underneath.
The most striking of those dynamics is what the Bank describes as a "low hire–low fire" environment — a state in which employers are neither letting workers go in significant numbers nor actively bringing new ones on board.
Vincent said this combination creates inertia, weakening the economy's ability to reallocate workers from lower-productivity sectors to more productive ones.
The April 2026 jobs data reinforced that picture. The economy shed 17,700 positions in April, pushing the unemployment rate to 6.9%, up from 6.7% in March, according to Statistics Canada.
Notably, the rise in joblessness was driven not by a wave of layoffs but by more people entering the workforce than employers were prepared to absorb.
Vincent noted that population aging may be contributing to the low-hire dynamic, with Bank of Canada surveys finding some businesses reporting difficulty replacing experienced workers and investing heavily in training new recruits rather than expanding their headcount.
On the skills front, he was equally direct: "A key factor appears to be the gap between the skills and experience workers have and the ones employers want."
Youth unemployment and what it signals for the future
Perhaps the most pressing concern in Vincent's address was the deterioration in employment prospects for Canadians aged 15 to 24.
After touching a record low of 9% in 2022, the youth unemployment rate had climbed above 14% by early 2026, according to Statistics Canada.
As of April 2026, it stood at 14.3%, compared with 13.8% the previous month.
Young people now account for nearly a quarter of the long-term unemployed — defined as those who have been searching for work for more than six months — a share that has more than doubled since 2022, Vincent noted.
Long-term unemployment overall is at its highest point since the early 2000s, outside of the COVID-19 pandemic years.
Statistics Canada's Labour Force Survey for April 2026, released Friday, showed the youth unemployment rate — covering Canadians aged 15 to 24 — climbing to 14.3%, up half a percentage point from March.https://t.co/vzhJxoABwS
— Canadian Mortgage Professional Magazine (@CMPmagazine) May 11, 2026
Vincent said a surge in immigration between 2022 and 2024 likely intensified competition for entry-level roles, though the subsequent reduction in immigration flows should offer some relief.
A widening gap between the skills workers possess and those employers now demand is another factor. Job postings over the past two years have required more experience than at any prior point on record, while the share of people who have never held employment has grown, according to Bank of Canada analysis.
Artificial intelligence may also be a structural force. "Finally, AI is another plausible structural explanation," Vincent said, noting that entry-level positions are most exposed to automation, though he added it was too early to determine that AI was a primary driver.
Vincent was direct about the limits of central bank tools in this environment. Interest rate adjustments can support an economy suffering from cyclical weakness, but they cannot resolve a mismatch between the skills workers hold and those the market demands, nor reverse the demographic pressures of an aging population.
He called on businesses, educators, and governments to take a more active role, raising questions about whether Canada's education and training systems are adequately preparing young people for a labour market in transition and whether pathways exist to help displaced workers find new footing more quickly.
A system of lifelong learning and on-the-job training, he suggested, has become more important than ever.
"These questions are more important than ever, and we need to think about them — collectively," Vincent said.
"In the presence of structural change, we all have a role to play in ensuring that Canada remains competitive and able to meet current and future challenges."
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