Young Adult Employment Report, July 2012

Although the unemployment rate inched up in July, Friday's unemployment report from the Bureau of Labor Statistics was a welcome reprieve following three months of disappointing jobs numbers.  A mere 0.037 percentage points were added to the overall unemployment rate, rounding it up to 8.3 percent.  Hints of growth in professional and business services, leisure and hospitality, and manufacturing put the job market ahead of expectations, despite the news of weakening GDP growth for the quarter reported in the previous week.  But while the addition of 163,000 jobs in July pulls the US economy from the precipice of a labor market back-slide, it is not a sign of strong recovery in the jobs market.  With a monthly average of about 151,000 jobs added to the economy in 2012, the market is barely keeping up with population growth and not offering any inspiration for discouraged workers to return to the labor pool.  

Like all workers in July, young adults were not sufficiently enthusiastic about the labor market to continue on a job search in the face of the listless indicators from the months before. Labor force participation rates dropped for 20 to 24-year-olds to 70.8 percent, down from 71 percent in June. Twenty-five to 34-year-olds left in greater numbers, yielding a July labor force participation rate of 81.1 percent, compared to June’s 81.5 percent. After some promising gains in the beginning of the year, the share of all young adults who hold jobs is again on the decline. The employment-population ratio for 25 to 34-year-olds is right back where it started in January 2012 at 74.5, with women in this age group seeing their lowest ratio of the year at 67.2 percent and men at 81.9 percent. For workers ages 20 to 24, the employment population ratio is below its average for the past 12 months at 61.2, with women employed at a ratio of just 59 percent and men at 63.5 percent.

As frustrated workers stop looking for jobs and exit the labor market they are no longer calculated into the unemployment rate, often leading to a decline in unemployment associated with a smaller labor force rather than increased opportunity. Last month the unemployment rate for 20 to 24-year-olds declined, reflecting a combination of higher employment levels and lower participation. But unemployment for workers in this group remains well above the statistic for workers overall, at 13.5 percent. In contrast, unemployment rates among 25 to 34-year-olds held steady despite the drop in labor force participation, as the employment level fell from June to July. The 25 to 34-year-old cohort managed to hang on to an unemployment rate at 8.2 percent, putting unemployment for workers in this group below the national average for the first time in four years.

Although not cause for jubilation, this month’s employment summary shows a significant improvement from the three months of underwhelming reports that came in April, May, and June. Adding 150,000 jobs per month at least covers growth in the labor force and will bring unemployment back to pre-recession levels sometime in the mid-2020s. But that is a long time away and young people looking to begin their careers today will suffer more than a decade of slow growth and subdued opportunities. These workers need an upward trend of labor market expansion. One month ago that prospect seemed very far away. With the release of the July numbers it isn't closer, but the gains are enough to keep eyes on the market for the next few months in cautious hope that such a trend may appear.

Catherine Ruetschlin is a Demos research analyst and co-author of the report The State of Young America. Every month she writes the Young Adult Report where she breaks down the young adult unemployment numbers each and every month after the BLS releases its Employment Situation Summary.