Young Adults Missing Out on Job Market’s Slow Gains

For many young people who tossed their graduation caps into the air this spring, the modestly positive jobs report for May did little to improve their employment hopes.

U.S. employers added 175,000 jobs in May, a better net gain than expected. And while the jobless rate ticked up to 7.6 percent from 7.5 percent, that was because more people joined the labor force, the U.S. Bureau of Labor Statistics said Friday. But not enough of the new jobs are going to young adults. In the 20-24 age group, the jobless rate was 13.2 percent, floating around where it’s been stuck for over a year.

“The gains have failed to benefit young Americans,” Rory O’Sullivan, policy director at Young Invincibles, a national advocacy group, said of private-sector job growth.

The sticky jobless rate for young adults worries economists. That age group includes recent college graduates who are trying to kick-start their careers, pay off college loans and establish separate households. It also includes young people with less education who aren’t equipped to meet the skill demands of available jobs.

And, while slow job growth was widespread last month across the private sector, some of the larger gains were in relatively low-wage service industries, part-time and temporary help services – where many young adults are working, instead of in the full-time careers they want.

David Gaston, director of the University of Kansas career center, said life for graduates coming into the job market is getting better, but slowly.

“Two years ago, it was really tough,” Gaston said. “Last year we saw a good improvement. This year we saw better improvement. But it’s still tough out there.”

There were some positive numbers in Friday’s report. The number of unemployed, 11.8 million, was, like the jobless rate, “essentially unchanged,” according to the labor bureau.

Another overall positive “was that the labor force participation rate went up,” said Daniel Heckman, national investment consultant for US Bank Private Client Reserve. “That’s an indication people are becoming more confident. They’re seeing it as a good time to venture into the labor market.”

Also, the 175,000 jobs created by established businesses, even considering a downward revision of 12,000 from previous job-growth estimates for March and April, was better than most economists expected.

The consensus outlook had expected more of a summer slump. Indeed, job growth has slowed in the past three months to an average of 155,000 a month, from the 207,000-a-month average gain in early 2013.

Modest as the job gains were, the stock market reacted positively, with the Dow closing up more than 200 points on the day. The middling gains also raised questions about whether the Federal Reserve will continue its bond-buying stimulus or will raise short-term interest rates.

Analysts say the private sector needs to create 200,000-plus jobs each month in order to accommodate new graduates, other entrants and re-entrants to the work force. Such job creation is important not just for those job hunters but for the national economy.

Bloomberg senior economist Joseph Brusuelas calculates that, conservatively, the nation will lose about $18 billion in wages over the next 10 years because of youth unemployment. That affects consumer spending, the foundation of the U.S. economy.

According to Brusuelas, six months of joblessness at age 22 results in an 8 percent lower wage at age 23, 6 percent lower at age 26, and 4 percent lower at age 30. In other words, it’s hard to catch up to lost earnings.

And there’s the related problem of underemployment. Stories abound of young college graduates who haven’t landed professional jobs in their major field of study and instead are working part-time waiting tables.

A recent study by Demos.org said the U.S. economy needs 4.1 million new jobs for young adults in order to return their employment to a pre-2008 level.

According to the Labor Department, whose household and employer surveys provide the unemployment and employment data, about 15.46 million Americans aged 20-24 are members of the labor force, which means they’re either working or looking for work.

That compares to about 6.6 million of that age group who aren’t in the labor force; they’re full-time students, homemakers or others who aren’t holding a job and aren’t trying to find one.

Generation Opportunity, a youth advocacy organization, estimates that the “effective” unemployment rate for young people in their teens and twenties is 16.1 percent, partly because of the number of them that aren’t looking for work.

The Labor Department said the 20-24 group had an employment-to-population ratio of 60.8 percent in May. Like with all age groups, that ratio fell during the Great Recession, but it has risen slightly since a low of 59.7 percent in January 2010.

And economists point to a further concern: The jobless situation is even bleaker for young blacks and Hispanics.