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March 15, 2004

Young People Giving Up on Economy

One meme out on the rightwing is that the media is unfairly hitting Dubya on the unemployment rate since today's unemployment rate is basically the same as in 1996. See Instapundit and others.

But the problem is that today's unemployment rate disguises large numbers of people leaving the workforce. Take this Business Week story (subscription required-- see full story in extended entry):

If young people's participation rate were equal to its level in March, 2001, the unemployment rate could be 6.6%.

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Unemployment, at 5.6% in January, has fallen from 6.3% in June, 2003. But that's not because of robust job growth. Instead, many younger Americans have dropped out of the labor force.

Since March, 2001, a total of 408,000 Americans aged 16-24 have left the workforce -- meaning they are neither employed nor actively trying to find a job. The labor-force participation rate -- the share of those 16-to-24-year-olds with a job or looking for work -- hit a 32-year low of 60.5% in December, accounting for the entire fall in the overall participation rate (chart).

It appears that many headed back to school. The latest data, through 2002, from the U.S. Census Bureau show that the share of 18-to-24-year-olds in college declined from 1998 to 2000 but resumed an upward trend after the recession began.

What if the drop-off hadn't occurred? If young people's participation rate were equal to its level in March, 2001, the unemployment rate could be 6.6%.

Posted by Nathan at March 15, 2004 09:02 PM