The Bank of Canada says long-term unemployment has risen to its highest level since the early 2000s. The central bank's latest report warns the trend could drag on future productivity growth and put extra pressure on consumer-driven parts of the economy.
What the data shows
Long-term joblessness — people out of work for an extended period — has not been this pronounced in more than two decades. The central bank's assessment points to a growing pool of workers who have been sidelined for months, struggling to re-enter the labor market. While the overall unemployment rate has stayed relatively contained, the composition is shifting. More of the unemployed are stuck in long spells without work, a pattern that historically has been hard to reverse quickly.
The Bank of Canada sees the rise as a signal of potential trouble ahead. When people remain unemployed for long stretches, their skills can erode, making it harder for them to find new jobs even as the economy picks up. That drags on overall productivity — the economy's ability to produce more with the same amount of labor. At the same time, long-term unemployment tends to weigh on household incomes and spending. Consumer-driven sectors like retail, hospitality, and services could feel the pinch if fewer people have steady paychecks to spend.
A warning for policymakers
The report doesn't prescribe specific fixes, but it makes clear that the trend merits close attention. The central bank's findings add to a growing body of evidence that Canada's labor market recovery hasn't lifted everyone equally. While some industries are scrambling for workers, others are still shedding jobs or offering only part-time or temporary roles. The mismatch leaves a chunk of the workforce on the sidelines for longer than expected.
The Bank of Canada's next policy update will be watched for any further discussion of these risks. For now, the numbers offer a stark reminder that low headline unemployment doesn't always mean a healthy labor market for all.
