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Young Money: As Summer Ends, Youth Unemployment Falls While Labor Participation Remains Low

Youth unemployment has returned to pre-Recession levels, but that's not always a good thing.

CREDIT: Unsplash user Álvaro Serrano.

In August, the economy added 156,000 jobs, the overall unemployment rate ticked up slightly to 4.4 percent, and the youth unemployment rate fell 0.1 percentage points, to 8.9 percent. This youth unemployment rate—which tracks just 16- to 24-year-olds—is the lowest the youth unemployment rate has been in any August since at least 2007. The youth unemployment rate has generally fallen to pre-Recession levels, though as will be discussed later on, this may be due to fewer young people looking for work rather than fewer young people unemployed.

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Youth unemployment fell across the board when disaggregated by race and ethnicity, though large disparities still exist. In August, the white youth unemployment rate fell to 7.7 percent, bringing the 2017 year-to-date unemployment rate for white youth to 8.3 percent. The black youth unemployment, however, remains nearly double this: in August black youth experienced a 14.2 percent unemployment rate, and the 2017 year-to-date average is 15 percent. Latino youth also face higher unemployment than white youth, with a 9.6 unemployment rate in August and a 2017 year-to-date average of 9.7 percent. Asian youth, who experience very different levels of unemployment depending on their ethnicity, saw a dramatic drop in unemployment in August, from 10.1 percent in July to 7.8 percent. This enormous decline is at least in part attributable to the small sample size of Asian youth, which causes large swings and volatility in the Asian youth unemployment rate and makes the data hard to read. The 2017 year-to-date Asian youth unemployment rate is currently 9.3 percent.

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As mentioned earlier, lower unemployment rates are not the absolute indicator of a strong economy many take them to be. There are multiple factors that can cause unemployment rates to fall. More young people working could lower the youth unemployment rate, but fewer young people looking for work could just as easily contribute to a drop in unemployment, since the unemployment rate only measures the number of young people looking for work and unable to find it. To provide more context to the unemployment rate, we turn to the youth labor force participation rate, which measures the proportion of people working out of the entire population, not just the proportion of people looking for work. In August, the youth labor force participation rate was 55.6 percent, bringing the 2017 year-to-date average to 55.6 as well. This figure pales in comparison to pre-Recession youth labor force participation rates, which regularly cleared 60 percent. While there are many reasons—good and bad—for the youth labor force participation rate to fall, that the rate has not returned to pre-Recession levels indicates that a low youth unemployment rate may not be the unadulterated positive indicator many take it to be.

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