One in five unemployed Canadians has been out of work for six months or more
More than one in five unemployed Canadians has now been out of work for at least 27 weeks, well above the pre-pandemic norm.
The Bank of Canada says it may not yet have the answers to explain why.
External deputy governor Nicolas Vincent told a Montreal audience Tuesday that the central bank must determine whether the labour market's slowdown is cyclical or structural before adjusting rates, the Financial Post reported.
The distinction matters: cutting rates to stimulate demand when the real problem is structural, such as population aging or trade friction, could stoke inflation rather than fix the underlying issue.
Vincent said central banks traditionally respond to economic cycles by adjusting interest rates, but structural change makes "our options more complicated."
According to Statistics Canada and Bank of Canada data cited by the Financial Post, 22.5 percent of unemployed Canadians had been out of work for 27 weeks or more as of April 2026, against a pre-COVID-19 average of 17.1 percent from 2017 to 2019.
Vincent pointed to a widening skills mismatch as one driver.
Job postings over the past two years have demanded more experience than before, while the share of people who have never worked has grown.
Vincent said AI is another "plausible structural explanation," with job-finding rates falling most sharply in AI-exposed sectors and entry-level positions hit hardest.
It remains "premature to conclude that AI is the determining factor," he cautioned.
Canada's aging population and a "low-hire, low-fire" environment have also made the labour market less dynamic, the Financial Post reported.
Workers are moving less frequently from lower- to higher-productivity sectors, weighing on income growth and collective purchasing power.
High uncertainty from US tariffs and the Middle East conflict has reinforced that trend, pushing businesses to slow hiring rather than cut headcount.
Vincent acknowledged the difficulty of reading these signals in real time.
Vincent told the Financial Post that distinguishing structural change from cyclical fluctuation in real time is "one of the main challenges," adding that the Bank must "remain humble and clear-eyed."
"Risk management is therefore essential," he said.
Beyond monetary policy, Vincent said Canada may need new trading partners to reduce exposure to US trade.
Post-secondary institutions, he added, may need to retool education and training programs to help new entrants and displaced workers adapt to a changing labour market.
