Young People Gained Ground in April, But Unemployment Is Still High

The good news in the April unemployment numbers delivered by the Bureau of Labor Statistics on Friday finally spilled over to people under 25, who saw their unemployment rate drop last month even as their labor force participation rate increased.

This marks the first time in 2013 that more people in their early 20s joined the labor market than left it, though the rally did not make up for the workers already lost so far this year. The labor force participation rate for people ages 20 to 24—at 70.9 percent in April—remains half a percentage point below where the age group ended 2012. But the accompanying drop in the unemployment rate for 20 to 24-year-olds – from 13.3 percent in March to 13.1 percent in April—shows the market can absorb the return of discouraged young people as they make their way back to working life. Since many of those still sitting out of the labor market will start looking for summer employment over the coming weeks, the capacity to place them into gainful employment now offers some hope that the search for summer jobs will not cause unemployment rates to skyrocket in the months ahead.  

The older cohort of young workers—ages 25 to 34—did not make gains in April, but managed to hold on to an unemployment rate just below the national average for the second month in a row. For 25 to 34-year-olds the April unemployment rate was unchanged at 7.4 percent. In this case, though, the stable unemployment rate masks an important loss for the age group. Twenty-five to 34-year-olds actually left the job market in April, exhibiting a 0.2 percentage point decrease in labor force participation to 81.2 percent. These young people are back down to their lowest rate of participation from last year, wiping out any gains in participation they made in the fall and winter of 2012. In fact, in April the same share of the 25 to 34-year-old population had jobs as did last October—an employment-population ratio of 75.2 percent.  

Despite the better than expected job creation last month, and the fact that unemployment rates for young adults have slipped from their recessionary highs, there remains a serious employment crisis for people at the beginning of their careers. Fully one half of the unemployed people in the economy in April were younger than age 35—a total of over 5.9 million workers. Unemployment rates for young people remain well-above those of older workers, and that does not even begin to count those who left the labor market and are waiting for better prospects before they return.  

At the same time, job growth so far in 2013 has been steady, if not robust. After upward revisions to the disappointing numbers from March, we’ve seen an average of over 195,000 jobs added to the economy each month this year. And while that is not enough to propel us back to full employment in the next 5 years, the ability to stay above the average growth for 2012 could be cause for cautious optimism.

That good news leads to two further considerations.

First, the reappearance of employment opportunities should draw people back into the labor force. For the remainder of 2013, rising labor participation rates and solid but not spectacular job growth should drive the unemployment rate up. That means that as the labor market improves the main statistic used for judging its progress will worsen. 

Second, now that job growth has outpaced increases in the size of the working population for 10 consecutive months, we have a good opportunity to evaluate the types of jobs we are creating. In April, nearly 60 percent of new jobs were in retail, food service, and temporary employment. These areas of employment are likely to be low-pay; in fact, two thirds of all minimum wage earners are employed in either retail or leisure and hospitality (the industry that includes food and beverage establishments).

But low wages are just one part of the problem. Last month, alongside the creation of 165,000 new jobs, the average number of hours worked per week decreased. In retail and leisure and hospitality in particular, firms hired new workers while cutting the average hours of each worker on the clock. But while a part-time position pulls a person out of the ranks of the unemployed, it may be inadequate to cover the costs of basic needs like transportation, child care, or health coverage for a worker in a low-wage industry.  This underemployment problem leaves millions of people without the means to care for their families or improve their prospects for the future. 

At the same time, the promise of new jobs that should lure young workers back into the market is less effective when it is a call to low pay, few hours, no benefits, and a continuing struggle to survive. Our economy can do better—through setting decent wage standards and guidelines for benefits available to part-time employees like those in HR 675, the Part-Time Workers’ Bill of Rights. It will have to, if we want to bring discouraged workers back to the market and restore our potential for high productivity and growth.