The US labor market remains strong for pretty much every group except young adults.
The unemployment rate for workers ages 20-24 hit 7.9% in May, the highest since August 2021 and nearly double the national average, the US Bureau of Labor Statistics data reported June 7 shows. Some 308,000 people in this age group have also dropped out of the labor force in the past five years as the participation rate fell to 70.8% in May 2024, a drop from the May 2019 level of 73.3%.
Relatively high unemployment and falling labor force participation contrast an otherwise healthy US job market marked by a broader unemployment rate near its historic low and a ballooning worker pool for other age groups. The drop-off in young adults, however, reflects some moderating in the breakneck pace of hiring that has characterized the last few years.
"The job market is not as strong as it was a year or two ago, and that slowdown is being borne by younger workers — particularly for new graduates coming out of school looking for their first full-time jobs," said Luke Pardue, policy director at the Aspen Economic Strategy Group.
Robust hiring
Nearly 1.24 million jobs have been added through the first five months of 2024, including 272,000 in May, and the labor force participation rate for so-called "prime age" workers, ages 25 through 54, reached 83.6% in May, the highest since 2002, according to government data. And while unemployment ticked up to 4% in May from 3.9% in April, it has remained below that level since late 2021.
The unemployment rate for prime-age workers was 3.3% in May, roughly where it has been since the end of 2023.
The decline in the participation rate, a measure of the share of workers in a given group either employed or actively looking for work, appears to be unique to the 20-24 age group.
"This has been one of the weakest segments in the workforce for the entirety of the post-pandemic period," said Guy Berger, director of economic research at the Burning Glass Institute.
Teen workers, for example, saw their participation rate increase to 37.4% in May, well above the 33.6% rate in May 2019.
Dynamics shift
Pardue said in the wake of the pandemic, workers in their early 20s had little trouble finding jobs as the demand for workers greatly outpaced the supply of workers. Labor force dynamics that benefited younger workers, such as the Great Resignation, have mostly ended, and the slowdown in the job market has led to a rise in unemployment and underemployment for workers in their young 20s.
"Businesses are adding jobs at a slower pace, and workers, less confident in their ability to find a better job, are staying put in their roles," Pardue said. "As these dominoes in the job market fall, younger workers are left at the end struggling to find jobs, with fewer opportunities than they had just a few years ago."
Employment among the 20-24-year-old age group has been "stubbornly weak" for months, as other age groups have seen net increases in employment relative to pre-pandemic levels, Thomas Simons, a US economist with Jefferies wrote in a June 7 note.
The young adults may be working, but in early careers not measured by government data, such as a self-run online business or "as-needed" gig work. They could be staying in school longer than potential workers in this age range had done before or holding off on employment until they find a position that fits their work preferences, such as a fully remote job, Simons wrote.
The latest US government jobs report showed a relatively robust labor market, with wage growth steadying and unemployment only rising slightly. About one-third of the jobs added in May were in private education and health services and nearly another third were in either leisure and hospitality or local government.
"Job growth continues to be relatively concentrated," said Shannon Seery Grein, an economist with Wells Fargo. "The headline gain in payrolls cannot be ignored. ... It should be taken in the broader context of a labor market that is showing clear signs of moderation."