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Young Money: In July, Youth Unemployment Falls But Labor Force Participation Remains Low

In July, youth unemployment fell but the low proportion of young people participating in the labor force also remains low.

CREDIT: Pexels.

In July, the economy added 209,000 jobs and the national unemployment rate fell 0.1 percentage points, to 4.3 percent. The youth unemployment rate (which tracks 16- to 24-year-olds) also fell 0.1 percentage points, to 9 percent flat. This brings the 2017 year-to-date youth unemployment rate to 9.3 percent, matching pre-Recession levels. The youth unemployment rate has steadily fallen over the past few years, from 13.4 percent in 2014 to 11.6 percent in 10.4 percent in 2016.  However, wage growth remains slow overall, and labor force participation for youth has yet to return to pre-Recession levels, signifying that low youth unemployment rates may not be full-blown cause for celebration.

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While overall youth unemployment is low, when disaggregated by race and ethnicity, it’s clear that some youth experience much higher unemployment rates. In July, the black youth unemployment rate was 16.2 percent, over twice as high as the white youth unemployment rate of 8 percent. The Asian youth unemployment rate, which continues to be noisy due to wide variations of unemployment rates among different ethnicities within the Asian youth umbrella, was 9.9 percent in July, bringing the year-to-date average for Asian youth to 9.5 percent. Latino youth continued to experience slightly higher-than-average unemployment rates in July, at 10.1 percent.

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The youth labor force participation rate (LFPR) remains concerning, coming in at 55.5 percent in July and bringing the year-to-date average to 55.6 percent. The youth LFPR measures the number of young people who are working out of the entire population of young people, in contrast to the youth unemployment rate, which measures only the proportion of young people unemployed out of those who are looking for work. Therefore, even when youth unemployment rates are low, if youth labor force participation rates are also relatively high, that may not indicate that more young people are working, but simply that fewer young people are looking for work. This appears to be the case, as the youth labor force participation rate has not returned to pre-Recession levels (which regularly surpassed 60 percent, versus the 55 percent rate youth have been stuck at since around 2010) even as the youth unemployment rate generally has. There are reasons both good and bad for low youth labor force participation rates, such as more young people leaving the labor market to enroll in school, or fewer young people in the labor market because they cannot find work. Regardless, the stubbornly low youth LFPR remains worth watching, and, paired with slow wage growth, provides cause to view low youth unemployment with suspicion, not celebration.

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