As we all know, the world economy recently endured a precipitous tumble. Even five years after the near-depression ‘s onset, unemployment remains high and economic growth is constipated. The financial crisis opened up a sinkhole in which millions of Americans lost their jobs. No one has been more affected by the debacle than young people.
To the average American, the unemployment rate is the indicator to which they pay the closest attention. As well they might, when you consider that unemployment is the black mark on the American economy .
The August headline unemployment rate dropped from 7.4 to 7.3 percent and 169,000 new jobs were reported, but that was fewer than expected. Unemployment is at its lowest rate since December 2008, but the rate fell for the wrong reason: another 312,000 Americans stopped looking for work and are no longer counted as unemployed.
These people essentially become nonexistent, usually a sign of an ailing economy, not a recovering one. If the economy were growing, the unemployment rate would decline because people found jobs, not because they quit looking.
From a broader perspective, current views of the labor market can roughly be divided into two groups. One argues that the weak labor market is the result of a shortfall in aggregate demand and argues for continuing an aggressive monetary policy known as quantitative easing, whereby the U.S. Treasury buys up billions of dollars of debt.
The other group notes that structural factors such as the rise of technology are the major challenges for the labor force. That means firms have jobs but can’t find qualified workers. For this crowd, greater emphasis must be placed on programs such as job training and mobility assistance.
It is generally believed that 250,000 new jobs are needed every month to keep pace with population growth and people entering the workforce for the first time. In addition to the anemic August jobs report, the federal Bureau of Labor Statistics also revised its June and July figures sharply downward.
It turns out that June’s job growth was not 188,000 as previously reported, but only 172,000. July’s numbers got knocked down all the way from 162,000 to 104,000. Does this suggest a correction next month to the August increase of 169,000jobs?
Labor participation, the percentage of Americans over 16 who have jobs or are looking for them, declined slightly from July to August and is at a 35-year low. BLS reports that 90 million eligible workers are sitting on the sidelines who don’t count as unemployed. The recent decline in the unemployment rate reflects reduced labor force participation, not increased employment.
The labor market is worse than government numbers reflect. Businesses are not hiring because of stagnant demand, and sales are not growing because consumers have less money. Consumers have less money because stagnant demand means businesses are not hiring full-time employees. It’s a classic Catch 22.
Many subgroups, especially the young, less educated and minority groups, are facing unemployment rates well into the double digits. Young workers have been the hardest hit. The recession and weak recovery have sharply reduced opportunities for entry-level workers in virtually every industry. The August unemployment rate for Americans under 25 was 15.6 percent, more than two and halftimes the rate for those 25 and older.
This may explain why young people are so pessimistic about the future; perhaps they fear they will be part of a “lost generation.” Many of these future leaders are sitting on the sidelines, having trouble finding full-time work that will help them develop the skills they need to transition to higher paying employment. They are struggling to pay off massive student loan debts and living with their parents because they can’t make the loan payments while living on their own.
The jobless economic recovery and the absence of bright, young people in the labor market do not portend well for our country. Instead of buying homes and creating new households, more young people are becoming dependent on government benefits, not paying taxes and creating a new underclass that will endanger America’s future.
originally published: September 21, 2013
