America’s Modest Recovery Is Leaving Young Adults on the Sidelines

Unemployment

Source: http://www.flickr.com/photos/kentuckyunemployment/

Earlier this month, Pew Research published an analysis of data from the U.S. Census Bureau that showed 36 percent of 18- to 31-year-olds — the so-called Millennial generation — were living at home in 2012. This is the highest share in at least 40 years and represents a slow but steady increase from the 32 percent of young adults who were living at home before the Great Recession.

There’s a lot to unpack about this and a lot of speculation as to why so many young people haven’t flown the nest yet. Rising college enrollment — in this age of surging costs and dubious interest rates, students can save a ton of money living at home — and lower rates of marriage among the young are certainly contributors to this trend, but the chief culprit may be a higher rate of unemployment.

As of July, the headline unemployment rate among those aged 20 to 24 was 12.6 percent, 5.2 percentage points higher than the national average of 7.4 percent.

However, this comparison is slightly arbitrary, given that the young have historically always had a higher rate of unemployment. Young people are often less skilled and less educated than older workers competing for the same jobs.

But with this in mind, we can look at the historic difference between the average rate of unemployment and that for younger people, and see that the spread has increased. This suggests that the rate of unemployment among young people is higher relative to the average rate of unemployment relative to historic norms.

Young Unemployment Rate

Source: Data from FRED Economic Data

Unemployment Difference

Source: Data from FRED Economic Data

There have been a number of reasons floated for why the recovery has left young adults on the sidelines. The Progressive Policy Institute suggests that generally difficult labor market conditions and a more competitive job market have forced middle-skill workers into lower-skill jobs. As this work moves down, it forces lower-skill workers out of the labor force.

This idea is evidenced by the rate of high-, middle-, and low-wage job creation in the post-crisis period. A report from the National Employment Law Project showed that since the first quarter of 2011, employment has grown by 8.7 percent in lower-wage occupations and by 6.6 percent in higher-wage occupations. Meanwhile, employment in mid-wage occupations has fallen by 7.3 percent.

Low-wage industries like food services, retail, administrative support, and waste management services constituted 43 percent of net job growth during the recovery. Within these industries, 76 percent of job growth occurred at the low end of the wage scale.

NELP Occupational Growth Rates

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