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Next Generation, Waiting

There has been little doubt that employment has been improving in the US.  From the trough three years ago 5M jobs have been created.  That’s not enough to fill the 12M or so that need to be created, but it’s a start – and it’s been steady progress.  But who is being left behind as the situation (very) slowly improves?

The most important group are the young who are looking for their first job.  Those 20-24 have a lifetime of expectations and habits created by the start of their career, and by any measure their outlook is not good.  While the economy transforms itself into whatever will create the next wave of opportunity the young are being left behind.  This is true throughout the developed world, particularly in Greece and Spain, but the problem is also acute here.  Let’s start by defining the problem.

Youth-UnemploymentThe best way to consider youth unemployment is a departure from the usual Barataria procedure.  The “headline” unemployment rate is not very useful because it excludes so many “discouraged” workers who are no longer “actively looking” for work, even though many would very much like a job.  This is a much better gauge for the young, however, who often go to school to develop the skills that lead to a career.  It’s also the best data that our old friends at the St Louis Federal Reserve have to offer.  From their wealth of information we have this graph of the headline unemployment rate in red with the same methodology used for those 20-24 in blue, since 1968:
Note that the rate among the young always tracks about 3% higher than for all workers.  The gap grows to 4-5% in the 1990s and 2000s, but becomes even larger more recently.  Here is the same data since 2008, with the official “recession” in the shaded grey area:
Note that at the peak in 2010 the overall rate was 10% but among 20-24 year olds it spiked over 17%.  There is a lot of noise in these data so it’s hard to be too exact, but we can see trends.  That gap of 6-7% has held and possibly even grown as the unemployment situation improves more slowly for the young.  As of today the 7.8% overall rate is met with a 14.1% for those looking for a first job.

This is consistent with a job market that is primarily looking for specific skills to fill immediate needs, one characteristic of this labor market.  Also, given that growth is coming more from small companies, the need for experience is probably even more acute.  But the lack of manufacturing jobs is probably the main reason why youth are having trouble getting that first gig, as these are traditionally the jobs that someone can get into out of High School and grow on the job.

This is, however, a global problem that is very acute in the developed world.  We’ve already seen how what we call “generations” are not really life cycles but economic cycles – a collection of attitudes created during the formative years that cycle with the boom and bust of opportunities.  Will tomorrow’s citizens be defined by resentment and cynicism rather than the “can-do” attitude that comes from a rapidly growing economy?

The short answer is that we can’t count on an expansion of credit or an increase in consumer spending as long as 1 young person in 7 is unemployed.  More to the point, the attitudes being formed will at the very least be more frugal and careful even if there is a strong recovery in a few years.  This is a generation that will remember hard times, likely as long as they live – much like those who grew up in the Great Depression.

Is there any sign of improvement on the horizon?  The trend towards reduced opportunity for the young has been growing for 20 years and has become very large lately.  It’s not likely to change anytime soon, either.  Given that it is much worse in other nations and this generation is inherently more global we can expect fairly bad attitudes to develop for a while.

While the economy is restructuring to whatever replaces the one that failed in the 2000s, those who will inherit the world are not doing well.  It will be up to the young to make something happen, but they are not getting a break by any measure.  Whatever the next economy winds up looking like, you can bet that it will at least be more cautious and less hopeful.  We will have to see what that means.

16 thoughts on “Next Generation, Waiting

  1. Things are very hard for people who are just starting their careers right now. I agree that this is going to be an issue for a long time in the future. I got my first job right out of school and it was absolutely invaluable. It set up my work habits for life and gave me great experience. I can’t imagine people not having that experience if they want or need to go off on their own as a consultant later.

    • That is what I worry about the most, yes. But if things do change completely, perhaps a lack of experience will be OK. Something tells me that a whole generation not schooled in the old ways means massive change is indeed ahead – once they get things going. But first they need to have an opportunity of some kind. It will probably have to be created from scratch, so it’s only reasonable that it takes time.
      This is a good time to say that money is not limiting opportunity right now – interest rates are very low and $2T or so is on deposit at the Fed. But these kids who are unemployed are a lot of energy being wasted and that is not good.

  2. If there are no jobs people will either have to make their own career or take something that they might think is beneath them. No one hands out jobs for nothing so if there is no career for them I advise young people to take classes at the technical institute or community college. Welders, skilled plumbers, and electricians are always in demand. There are many opportunities if people want them. It may not be what they thought they would have but the experience is what counts as much as the pay. There is no excuse for being resentful just because life didn’t hand you what you expected.

    • Jim, I want to refer you back to my conversations with the kids now in High School that I wrote about here. It’s been over a year since I wrote from their perspective, but little has changed. They understand this completely, and want advice about how to get a J-O-B and not even a “career”. They are very realistic, I’ve found in my small sample.
      I’m going to follow this more closely for a while, but I thought today we should have an over-view. As Smithson has noted, I’ve been very happy over the last year that the economy is growing – but people are being left behind. It’s a real problem.
      Yes, get these kids to Tech Schools! By all means. They will learn very valuable skills no matter what happens later in life.
      I am going to stay on this more closely now that I can see the problem. 15 months between posts on the topic is not good – especially now that we’ve established that the broader economy is making its own momentum.

  3. Great blog, great topic. If the recovery or whatever you want to call it is just gaining steam I think this has to be expected. Since your always looking for signs of a new trend perhaps you have hit on something to watch for now, if young people start finding jobs it may be the next sign that things are improving. You can’t really say it is improving with this kind of unemployment among the young.
    If 14.1% are looking for a job how many are in school? What are they studying? That may tell us more about the future too.

    • Yes, this should be watched closely. I haven’t been watching it lately and that was probably a mistake – but it appears I didn’t miss much. I think this is what to watch and what to insist on when we talk about growth.

  4. Economists lament measured unemployment because once that willing labor is foregone it never can come. It is a lost opportunity to better oneself and contribute the needs of fellow human beings. It is different than capital not doing anything. Financial capital is only made worthwhile by the opportunities for a rate of return. If interest rates are low, so be it. The capital owners might as well eat their money and buy another Cadillac. Underutilized factories and equipment is sort of a temporary.lost opportunity if it could be dismantled or recycled. Maybe the factory just sits idle.

    These young people and those in elementary school and high school are the ones who will help pay for the retirement and health care of those born in the 1960s. It is in our interest to make them productifve and restructure the economy. I don’t have any solutions; it is a conundrum like much of what we discuss in Barataria.

    Those who suffered in the great depression were later bouyed by the economy of the 1950s, 1960s. If they lived long enough they received social security and medicare benefits that exceeded the sum of the federal tax and fica payments they made., This is because it was decided that early beneficiaries wouild receive full benefits–they wouildn’t be penalized for the social security system starting for thenm at mid or later life. The economy and the demographics were there to give them that full benefit.

    Young people voted for Obama. I believe that Obama and legislative leaders must step up to the plate and restructure social programs to give young people hope,.We can’t put them in a position of wanting to default on the national debt or it will be end of the United States.

    • Applause! Thank you for that great comment.
      Yes, the greatest resource of this or any other nation is nothing more nor less than the hearts and arms and brains of its workers. That is especially true of the young – those with the strongest hearts, the most tireless arms, and the most inventive brains among us.
      I didn’t phrase this in terms of hope – or the promise of hope. The young people I know are not all that resentful at this point, but they also do not seem to have a lot of hope. They seem very resigned and practical. That isn’t very good, all in all.
      But they do believe in progress, and I think that many believe that they can create a better world. I think it is time to get my kids on here to speak for themselves and their (as yet un-named) generation. Before I do, I’ll speak a little bit based on what I know of them (and anyone with a different view please correct me!).
      Your concluding paragraph is right on and I want to highlight it. There’s a Republican tone to it, but I promise you that it would resonate well with the young Obama generation that I know as well. What they want is a restructuring towards a world that looks ahead and promotes genuine opportunity – not a handout. They don’t want to default on the debt they are incurring, but they also do not understand why it is falling to them to fix it. Part of me can’t wait to take over and run things. Let’s get that happening, IMHO!

  5. The job market is terrible right now … you have to know someone to get anywhere … filling out apps is a total waste of time. I always knew the unemployment rate was crap from what my friends & I see … this confirms it. Most of them voted for Obama but I dont know why.

    • Yes, it is all about networking – which is to say that class structures are hardening and genuine opportunities to rise are closing down rapidly. It’s completely un-American by just about any measure and it makes me sick.
      But none of this is Obama’s fault – nor really the Republicans, either. This is a business cycle. How we respond to this is up to us and there is a lot of blame to go around here. I find Obama more flexible and open, so I am on his side. But we don’t have the Next New Deal that I really think should have been done.

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