Economics: Canada’s GDP, and Employment:
There have been a lot of interesting developments happening in Canada related to employment that I think are worth discussing. I’m going to explain why Canada has one of the highest youth unemployment rates it has ever seen, why Canada’s GDP growth has actually been a negative for citizens, and how politics are influencing this issue and what people in power are starting to do about it.
Toronto and Ontario Lag Behind Canada:
The first topic I wanted to touch on is unemployment in Canada and more specifically in Ontario and Toronto where I now live. The unemployment rate in Toronto in November 2024 was sitting at 8.2% which is higher than Hamilton (6.7%), Kingston (5.8%), Ottawa (6.1%), St. Catherine’s (6.6%), and almost every other major city in Ontario except Windsor (8.5%). Toronto’s unemployment rate is comparable to Northern Ontario where work is notoriously hard to find (8.4%). The overall unemployment rate in Ontario was 7.2% which is higher than the national rate of 6.8%. Why is Ontario doing worse than the country as a whole and why is Toronto doing worse than the rest of the province? Let’s find out.
Overshooting Immigration Targets:
Unemployment is the symptom, not the cause. In order to find the cause we need to understand how unemployment works in the first place, and this is generally just a case of supply and demand. But there are other factors at play, like interest rates, immigration and migration, investment etc. As we have all been made aware by now, Canada overshot it’s immigration and migration numbers by a significant amount in the past couple years and the government is beginning to try and put more restrictions on people coming into the country. Generally speaking, Canada has always been friendly to immigration, especially people who are highly skilled workers and are able to contribute positively or fill needs in our economy. It has been stated many times over that the only way for Canada to maintain it’s pension plans and continue growing GDP and productivity is through immigration. If immigration is such a good thing, why have we decided to cut it down? Well part of the reason is that we have nowhere to put people, housing has become such a large issue and pain point, and renting or buying almost anywhere in the country is becoming extremely unaffordable. People will come here, and expect to find a reasonable home and realize that a huge portion of their paycheque is going towards their rent or mortgage. This doesn’t explain unemployment, but it does help explain some issues we have with our economy as a whole.
Highest Household Debt in G7 Curbs Spending:
Another factor in our problematic economy is that Canada has the highest household debt to income ratio in the G7. Meaning that people in Canada are extremely overleveraged on their homes and rent payments. This affects the economy in ways that people may not understand. Traditionally the people who spend the most money tend to be middle class, and spending money is what stimulates the economy and leads to growth and expansion. What has happened over the past few years with the skyrocketing costs of housing, the expensive mortgages that people are renewing into, and general high inflation. Is that people do not have excess money to spend, and consumer confidence is quite low.
Employers Pull Back Investment:
If people are not spending, there is no reason for companies to make investments in their workforces and R&D new products when there is no demand for those things, and in many cases shrinking demand. We now find ourselves in a situation where our GDP per capita (per person) has actually gone down at the fastest rate in the G7. This is a much more accurate measure of quality-of-life changes, as compared to overall GDP growth. Part of the reason per capita is down is because we’ve let in so many people (over a million in 1 year). The overall GDP has gone up compared to a year ago, but per person has gone down. Without all these extra people boosting our numbers we’d be in a technical recession. The way that falling GDP per capita manifests in people’s real lives is the realization that their money doesn’t go as far as it once did and struggling to afford and adjust to fewer things, fewer luxuries, fewer benefits that come with a growing economy. Life has become more difficult and paying bills has become more challenging in the past couple years for the grand majority of Canadians. The average money that Canada produces, per person in the country, has gone down, there is literally less to go around. But the economic headlines don’t usually focus on GDP per capita, they focus on GDP and proudly promote the fact that our economy is (technically) growing.
Newcomer Credentials Not Recognized:
Because of all these factors: high interest rates, high levels of household debt, low business investment, declining GDP per capita, and millions of people coming to Canada, we are suffering an unemployment problem that is getting progressively worse. These problems are also making it even more challenging for all the people and students who come here. I don’t believe that people should expect handouts, but by the same token I’m not sure that it’s fair that we are telling people to come here, and then they’re met with the reality that there’s just no work for them or their credentials aren’t recognized or a million other hurdles are put in their way to succeed. Work is becoming harder and harder to find due to the above, this leads to strains on public services, food banks, and more. By allowing the sheer number of people to come into the country that we did, we are effectively draining our own resources at breakneck speed. Stack on top of this our housing construction issue which is a whole other topic for a whole other blog, and we’re just squeezing people for everything they have. High cost of housing, poor employment, the picture is bleak. A lot of the economic factors I’ve mentioned are leading to the cost of home construction to become un-feasible for builders, and this will lead to a renewed shortage of housing about 3-5 years from now, which is really not what we need added to the pile of problems.
Historically High Youth Unemployment:
Let’s discuss youth unemployment, I’ve been reading some scary things about the 15-24 age group. The core age group 25-54 is currently experiencing above long run average employment levels, the youth age group is not faring nearly as well. As of last year, employment was at somewhat normal levels for Ontario youth, hovering around 11%. But in the latter half of 2024 it has jumped to around 17% and is getting worse. This is problematic because getting a job is important to development for a lot of young people. Your first crappy customer service job motivates you to find a better job, internships lead to future full time roles, and you learn important life skills and how to work with others. These employment numbers getting worse are not only bad right now, but will be bad for the future workforce, youth unemployment is a crisis. France has declared youth unemployment a national crisis, and their numbers are better than ours, what does that say about us? These numbers are also directly impacting a lot of university graduates because it points to the fact that companies are hiring fewer and fewer new grads in an already extremely challenging environment to find work.
University Graduates Struggling to Find Work, Hiring Freezes:
This data backs up what I’ve been hearing anecdotally. I graduated from Engineering in 2023 and I’ve been talking to others who graduated from school around the same time I did. I’ve heard stories of people searching for work for over 7 months to a year and a half AFTER graduation to find work (many still looking). A client of mine that I spoke to a month ago who works for a materials engineering company is currently in a hiring freeze and knows of many other companies who are doing the same. This is as of November 2024. Every engineering graduate I’ve recently spoken to agrees with me when I make the comment, “I wasn’t aware when I started school, that part of the gig would be moving to the US.” Not just to find a job that pays well, but to find any job AT ALL! You suffer through years of engineering just to continue to suffer for another year or more to find a Canadian engineering job, it’s extremely disheartening and I don’t blame people for feeling disenfranchised with Canada or their expensive educations because of it. I can think of a greater number of people from my engineering cohort who are working in the US than those who are working in Canada. The ones who are working in Canada are only doing so because they are international students and have no other choice (or worked their butts off applying), but would much prefer work in the US, and likely will once they are Canadian citizens. I don’t know how else to say this, but we simply don’t have enough jobs in Canada and Ontario to keep people from leaving, and the US benefits from all these people we’ve spent (partial) taxpayer money educating.
Employers Hiring for Experience:
Another relevant point here is that as companies are cutting costs, tightening their belts, and possibly laying off highly qualified workers, why bother hiring a new grad you have to train from scratch where there is a pool of much more experienced, more qualified people for you to choose from. This contributes to the bleak outlook for youth employment. The numbers back this up because employment of core workers is steady and rising, while it is falling for youth. Diverging a bit from the data again, I read recently a comment from a Canadian online forum that you used to be able to just walk into pretty much any retail store and ask for a job and you’d be hired in a jiffy. But even these basic jobs are much harder to come by and staffed frequently by overqualified workers, or workers who aren’t getting paid properly and are becoming harder to find.
Part-Time Work Replacing Full-Time Work:
Another concerning fact is that we are losing full-time jobs almost at the same rate that we are gaining part-time jobs. Our employment situation is actually much worse than the numbers make it seem, full-time jobs are being replaced by part time-jobs and gig work. This is a problem and underscores that quality of life has likely declined for a significant portion of the population. Full-time stable employment is becoming a thing of the past for many people and they are replacing it with one or more part-time jobs. Along the same vein is underemployment, Canada is notorious for this. Everyone has a story of when they discovered that their Uber driver was a doctor in their home country. I don’t have any issue with doctors having to go through recertification and a couple years of training to get up to speed on how we do things here. But there are no spots available for them in residency programs and yet we have a huge shortage of family doctors! What are we doing here?
“98% of Graduates Are Employed”… at McDonalds:
I feel similarly when I learn a recent university graduate is working at McDonalds just like they were in high school. The only difference is that they have a 4-year university degree and are $30,000 more in debt. The situation here is quite frankly bizarre. This reminds of an ad that I would often see in Hamilton that made me laugh while I was on the bus to and from McMaster University. Brock University was advertising that “98% of [it’s] graduates were employed within 2 years of graduation.” No mention of whether those graduates were employed in their field or a related field or if they were using their degree at all for that employment. So I would always joke “yeah and 50% of them are working at McDonalds or underemployed.” It’s not impressive at all that after 2 years out from school you might finally decide to move out of your parents basement and start working literally any job to pay your students loans back. I knew it was bad 5 years ago, and it’s only gotten worse thanks to all these knock on effects of the pandemic and other world events.
Why Toronto is the Epicenter:
So back to the question I posed at the top. Why is the employment rate worse in Ontario and Toronto than the rest of the country? The answer lies mainly in the number of people that choose to come to the province. Ontario is the largest province, has the most schools, and brings in the most people. But we also don’t have as diverse of an economy as the US. We are not the profit center of Canada, that honour goes to our silicon valley, Alberta and their oil. We don’t have the most profitable enterprises in the country, yet we see the most people coming here. Demand to live and work in Ontario and Toronto is much higher than supply, therefore we see the phenomenon’s I have illustrated. This supply-demand imbalance is also somewhat of a contributing factor to all the issues I posed above related to youth unemployment, people leaving Canada, and our false GDP problem, it also underscores the importance of the governments of Toronto and Ontario taking these issues seriously and trying to identify solutions to all these problems. Much of the problem does still lie with the Federal government’s regulations and Bank of Canada policy. But employment, especially for youth, is something I believe needs to be addressed by all levels of government on top of what they’re already doing with housing and population.
Keep working hard,
-Oliver
