It has been apparent for some time now that employment for graduating students and for young people looking for full time employment has been dismal this year. Statistically, unemployment among young people tends to be higher than the general working population but this year has been particularly difficult. Youth unemployment in Canada was 14.6% in July 2025 - the highest its been since 2010 (not including the pandemia years), and getting worse. While some of this is due to the uncertain business climate brought about by the new US business tariffs, there are three other factors to consider: the deployment of AI technology that is and will continue to be a significant factor in the future of youth employment; the changes employers made after the pandemia.to downsize their workforce; and the employability and soft skills of young people entering the workforce.
The first two factors are analysed in a paper published by Lightcast (formerly the Burning Glass Institute. For the third factor, we examined ERS data to see how youth employment readiness is affected by the lack of employability and soft skills. The data we chose for comparison are two twelve month periods between May 2024 and April 30, 2025 - the time of the year when most post secondary and high school students are graduating, and May 2019 to April 30, 2020 prior to the start of the pandemic and the emergence of AI in the workplace..
The data validates the impact these forces are having on young people relative to older people looking for employment or who are already in the workforce.
We will revisit the data again once the full scope of the Canadian government's investment in large infra structure projects and in the Canadian military are known and, whether the promised deregulation of inter-provincial trade in goods and services really does materialize.
Factors Contributing to Unemployment
"For the first time in modern history, a bachelor’s degree is failing to deliver on its fundamental promise: access to professional employment.". Thus begins the opening sentence in a recent paper by the Lightcast (Burning Glass Institute) titled, "No Country for Young Grads - The Structural Forces That Are Reshaping Entry-Level Employment.The paper attributes this change to four factors, including the following three:
Entry level jobs are being eliminated by AI.
Companies that survived the pandemia, are doing as much, or more business with fewer staff.
An over supply of college graduates.
The authors argue that the lack of hiring new graduates by corporations is short sighted as America's long term competitive advantage in the world economy will continue to be in maintaining a knowledge based workforce.
While entry level positions for new graduates are becoming scarce, Business Intelligence positions that requires senior staff who have more experience, have not been affected. Through the inner understanding of their workplaces processes, Business analysts know what questions need to be answered by AI to tweak the business and make their operations more efficient. This then leads to more profits that are manifested in today's booming stock market. Canada's main trading index, the TSX is up 13% and is forecasted to continue to grow for the rest of year despite the uncertainty of the Canada-US trade agreement. To put this in perspective, the average long term annual gain of the TSX over the last 40 years was 8.7%.
This trend of fewer jobs for new graduates is not as pronounced for non college graduates. The chart below from Burning Glass shows the unemployment gap between graduates and their non-graduate peers is narrowing. For example, the unemployment rate of young college graduates has steadily risen to 4.8% from below 4% in six years while that of high school graduates has remained relatively constant at 7.4% in the same period.
Soft Skills
A majority of employers consider soft skills “essential” when making a hiring decision. and they are increasingly focused on these skills with 60% saying soft skills are more important today than five years ago, according to a June 9 report from TestGorilla.
Using ERS data, we examined nine soft and employability skills of youth (defined as anyone between the ages of 16 and 29 years). Two intervals in time were chosen - prior to the pandemia and the advent of AI in the workplace: 2019-20, and after: 2024 to 2025. The results showed a significant overall increase from 5-6 years ago in Not Employed Ready youth of 8% with the largest impact on youth of under 18 years. Noticeably, the Employment Readiness increased for job seekers 30 or older by 9% as shown in the chart below.
*The data does not distinguish between youth who are college graduates and non-college graduates. (Agencies administering the ERS have the choice of tracking highest level of education attained for reporting purposes).
On further examination of the data, youth in the age category of 19 to 24 show a significant improvement in the skills measured (chart below) post pandemia and in the age of AI. The young age group used the lull in employment during the pandemia to improve their skills but this has not been sufficient to materially improve their job prospects. There was a similar decrease in barriers (personal, environmental, and systemic) from 92% to 83% though the composite percentage at 83% is still very high. This would be a good starting point for career developers to focus on. Change in skill levels for the age group 24 - 29 showed improvements as well though not to the same extent as the younger group. Two notable exceptions were Job Search and Social Supports. Both showed a need for more assistance in the most recent assessments.
Conclusion
There are many forces reshaping entry level jobs. Young people contemplating college or university education and their career counsellors have the unenviable task of looking three to five years ahead to see what the employment picture will look like. However, there is room for much optimism: The Canadian government has made bold announcements to increase defense spending including growing the size of the Canadian Armed Forces. At the same time it has also sharply cut the quotas for temporary workers and immigration. In its next budget it is planning major infrastructure projects that will stimulate the entry-level job market. This coupled with any reduction in inter-provincial trade barriers will be a stimulus for college and non-college graduates. The employment prospects for youth even in the face of AI will get better.
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