From the archive: Canada's population skyrocketed, and so is (youth) unemployment (for now)
Canada took immigration to the max, and now entry-level jobs are scarcer than anyone would like . . . are we like Canada?
Random Walk is on vacation, but Canada’s youth unemployment is worse than ever, so why not publish this oldy-but-goodie from August 14, 2024.
A headline gets passed the censors!
Canada’s rising youth unemployment, coinciding with Canada’s rising youth immigration—could it be a saturation point?
A post-national quest for “no core identity” is firing on all cylinders
Is Canada a peek at what’s next? Is California the first Canadian among us?
👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. Canada’s youth unemployment a sign of what’s to come?
Every now and again, a headline escapes containment, and you wonder whether the editor was on vacation or something.
I mean, how did this get past the censors at Bloomberg?!
“Cheap foreign labor soars . . . as young workers are left jobless!”
What is this, 1920?!
Normally, an observation (let alone suggestion) that immigration poses any tradeoffs is basically blasphemy, in the sense that it’s festooned with social and cultural taboos, as to make it unmentionable. If you said “soaring foreign labor is leaving workers jobless,” in most public places, people would nervously look around, to make sure no one has overheard.1
So, Random Walk appreciates the break from tradition, if only for a moment. Taboos are where the fun’s at.
As for the story itself, it’s interesting because it presents an obvious question: is Canada giving us an early preview of what’s around the corner?
An historically large surge of immigrants is making entry-level jobs hard to come by
The gist of the article is pretty straightforward: a massive surge of immigrants has created a surplus of workers, that is leaving both newcomers and (young) Canadians looking for work:
Entry-level jobs for students and recent graduates are much harder to find as the economy weakens, yet the country has also imported hundreds of thousands of temporary foreign workers for jobs, many of them in the food and retail sectors.
That’s contributing to a soaring rate of youth unemployment. Two years ago, the jobless rate for people 15 to 24 years old was a little over 9%. Now it’s 14.2% — the highest level in more than a decade outside of the Covid-19 pandemic.
For younger immigrants — those who’ve landed in Canada in the past five years — the unemployment rate is around 23%.
An analysis of government data by Bloomberg News shows explosive growth in the number of temporary foreign workers in food and retail over the past five years. The number of them approved to work in those two sectors jumped 211% between 2019 and 2023.
A 211% increase in temporary work permits to immigrants, mostly for entry-level jobs, has brought the youth unemployment rate in Canada back to post GFC highs.
This is what Canada’s youth unemployment looks like now:
At just under 15%, unemployment has risen pretty dramatically in the past two-years.
Note that all unemployment in Canada is above-trend, but only youth unemployment can fairly be described as “skyrocketing”:
Both “core” and “total” unemployment have risen above their 2017-2019 averages.
Back to the story. The rise in youth unemployment seems pretty well attributable (at least in part) to a substantial rise in youths.
Canada went from adding basically no young workers, to having young workers constitute ~33% of net-additions to the labor force:
That’s ~38K new young workers in the last month alone—up from negative 2K in the month before the pandemic.
Surge in supply, meets static demand, and unemployment ensues (for now).
Canada’s quest for “no core identity”
The growth in young workers is obviously not the result of a Canadian babyboom that kicked off in 2007, such that a bumper crop of 15 year olds suddenly came of age.
That would be silly. Canada is getting old and forgot to make babies too. The added labor supply is almost entirely via immigration.
In general, Canada’s population is growing more quickly than it has since the early 70’s (but really since the 40s):
And yes, Canada’s population surge is driven almost entirely (~98%) by immigration. Of those immigrants, more than half are on ‘temporary’ work visas, which (as per above), tend to serve entry level roles in hospitality, food and retail.
OK, so a massive surge of young entry level workers, specifically immigrant workers, has led to a massive surge in youth unemployment (amongst both Canadian and immigrant youth). Once again, more supply, without an commensurate increase in demand, and that’s what you get.
In terms of what happens next, Random Walk can only speculate.
That there’s unemployment now, certainly doesn’t mean that demand won’t eventually catch up. Generally, young people are a good thing, and the unemployment shock may well be a worthwhile price to pay for a growth boom that could follow. Growth-boom or not, terminally higher unemployment seems unlikely—shocks do get absorbed.
It’s also true, however, that when the entirety of your net-new youth are from not-Canada, you can assume that future-Canada will be very different than present-Canada.
Immigrants make up the largest share of [Canada] in over 150 years . . .
In 2021, more than 8.3 million people, or almost one-quarter (23.0%) of the population, were, or had ever been, a landed immigrant or permanent resident in Canada. This was the largest proportion since Confederation, topping the previous 1921 record of 22.3%, and the highest among the G7 . . . If these trends continue, based on Statistics Canada's recent population projections, immigrants could represent from 29.1% to 34.0% of the population of Canada by 2041.
If every third Canadian is quasi-Canadian, mounties, maple syrup, and hockey may feel like a foreign country soon enough.
Perhaps that’s a good thing, or an inevitable one, and certainly it means that there will be new and different things to celebrate. It’s also a rather deliberate thing, as Canada’s fortunate son famously told the New York Times back in 2015: “There is no core identity, no mainstream in Canada . . . there are shared values . . . those qualities are what make us the first post-national state.’’2
Aspirations for nothingness notwithstanding, in order to grow, post-Canadians will have to figure out how to get along well-enough for the new post-Canada to gel into whatever it happens to not-be.3
For now, Canada’s unemployment is rising and it’s GDP/Capita has regressed substantially:
Canada’s per-capita GDP is the same as it was 10 years ago (and heading the wrong direction).
That decline coincides pretty closely with rising interest rates, so perhaps with some looser financial conditions, growth-by-acquihire will look like a stroke of genius soon enough.
But for now, some discomfort.
But what about here in the United States? Are we the next Canada?
With the caveat that I know very little about Canada, and only slightly more about the United States, Random Walk ends where I started:
The situation seems familiar enough (albeit on a vastly smaller scale).
In the US, migrants also arrived at unprecedented levels. They played a very big role in closing the worker shortage, and bringing wage growth (and inflation) to heel. Basically all net-new jobs are attributable to foreign born workers.
But now that supply workers has caught back up to demand, there is that persistent question of whether demand for workers will actually grow (having been flat for the past ~2 years). And, if turns out that employers do have all the workers they need, will historically low unemployment revert to progressively higher unemployment, presuming people keep entering the workforce (from over the border, retirement, or elsewhere)?
In other words, have we reached something of a migrant/worker saturation point (at least, for now)?
If we’re anything like Canada, than it would seem the answer is “yes,” and more unemployment is to come.
As of now, Healthcare Makes All the Jobs, although that gravy train is slowing.4 At the same time, unemployment is, in fact, rising, and it’s driven by new entrants, reentrants, and temporary workers.
In other words people are having a hard time breaking into the workforce, at the same time as there are fewer and fewer new jobs to do. That certainly sounds saturation-ish.
People are having a harder time breaking into the workforce, at the same time as there are fewer and fewer new jobs to do.
Also, it turns out those temporary workers who lost their jobs probably had nothing to do with Hurricane Beryl, at all:
Goldman Sachs
The temp workers who lost their jobs were predominantly in California, and worked in hospitality.5
California has a lot of migrants, migrants do work entry-level jobs in hospitality . . . does that mean California is the first place whose cup runneth over (in the bad way)?
For now, we don’t really know. It certainly could be that California is the first domino of having more people wanting to work than work to be done. It could also be purely seasonal stuff related to summertime hospitality. And maybe rate cuts (whenever those come), will be the unlock to let the good times roll.
It’s also unclear what dominoes falling (or good times rolling) even means, when few people are getting fired (and labor force participation rates are as high as they can be)—stagnate is probably a better word. Stagnation isn’t good, but it’s not a meltdown (even if it is a saturation point).
Anyways, as per usual, Random Walk brings mostly questions, and few answers. “Is anyone hiring” is a pretty important question right now, however, so I’ll likely have more labor market related stuff soon.
Previously, on Random Walk
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Most recently, it took a long time for anyone to acknowledge the existence (let alone impact) of our open border. Random Walk posits that it was only when people began to understand that migrants were both deflationary and pro-growth, that the veil of ignorance was lifted. “Yes, there have been an unprecedented surge of migrants, they did replace Americans in the workforce, and they did drive down wages . . . all of which is good because we’ve had basically no growth without migrants, and high wages were blowing prices through the roof.”
It’s a narrative violation for everyone involved. Life is complicated like that. Sorry, I don’t make the rules.
Back then, the NYT called it “radical” to become a “new kind of state, defined not by its European history, but by the multiplicity of its identities from all over the world.” Now, I suspect the NYT would call it “radical” to want anything else.
Certainly, the substantial influx of Middle Eastern immigrants has made Canada an increasingly hostile and dangerous place for Jews, but life is about tradeoffs, after all. Any moment before those “shared values” kick in, I’m sure, although whose values to be shared with whom, may not go the way the Fortunate Son promised. It’s unclear if anyone made sure that the “no core identity” box was checked for all new arrivals. Well, we’ll always have Paris (wait, no, lol . . . same deal).
There is, however, a persistent need for “Therapy” healthcare workers:
Other than therapy, demand for healthcare workers (which is still the biggest source of demand) is slowing.
What kind of therapy? No idea.
Michigan is likely auto related, and Wisconsin likely explains the Education temp layoffs (because non-permanent teachers can file summer unemployment).
I hope you are having a great vacation.
I wonder if you have seen the phenomenon described in this article. Seems very suspicious I wonder how these assets are valued .
https://finance.yahoo.com/news/this-summers-hottest-trend-on-wall-street-private-for-longer-100057366.html