Canadian Millennials Are Still Stuck in the Basement—and Things Are Getting Worse
The share of unemployed millennial basement-dwellers in Canada is on the rise.
In November 2014, Bank of Canada Governor Stephen Poloz drew attention to this unwelcome legacy of the financial crisis: the enduring presence of young Canadians unable to start their careers and move out of their parents' homes.
"I bet almost everyone in this room knows at least one family with adult children living in the basement," the governor said in a Toronto speech. "I'm pretty sure these kids have not taken early retirement."
According to Bank of America Merrill Lynch North America Economist Emanuella Enenajor, "The basement has gotten a little more crowded."
The employment rate for Canadians between the ages of 15 and 24 has retreated to 55.2 percent as of June from 56.1 percent when Poloz flagged this problem.
"Clearly, prospects for this cohort continue to deteriorate, given the falling employment to population ratio," writes Enenajor.
One of Poloz's proposed remedies for this malady—that young people should seek unpaid work to build experience and avoid gaping holes in their résumés—provoked a severe backlash, particularly among labor activists. But emphasizing labor market outcomes among youth as proof there's significant slack in the economy is something that distinguishes Poloz from his predecessor, Mark Carney.
Carney, now at the Bank of England, left Canada's central bank with a tightening bias, although alternative measures of slack that took into account developments in the labor market, among other factors, showed a significant amount of spare capacity in the economy.
The Bank's Summer Business Outlook Survey showed that employers generally plan to increase staffing over the next 12 months, but at a slower pace than the expansion prior to the financial crisis.
The labor market's resilience in 2015 proved surprising, with average monthly job growth exceeding levels recorded in the previous two years. The pace of hiring, however, has slowed in 2016, with an average of 7,300 jobs added per month thus far.
If the Bank of Canada still aims to accomplish the goal of luring youths out of the basement, this means that monetary policymakers are still far away from being able to raise interest rates, Enenajor concludes.
"With the labor market struggling, why would Governor Poloz consider a rate hike?" she writes. "We also see no cuts on the horizon, given overheated housing."