It will take years of vigorous sustained economic growth to restore the U.S. labor market to anything close to “full employment”. Consider the case of young adults age 20-24. The unemployment rate for this age group has fallen from 15% to 12.9% over the past three years. Nonetheless, the labor market for young adults is anything but healthy. The labor force participation rate for adults age 20-24 has fallen from 73.4% to 70.8% since May 2009 because of the weak recovery. Although there are 264,000 fewer unemployed workers age 20-24 than there were three years ago, there are also 566,000 fewer labor force participants than if the participation rate had remained steady.
As I have written in a previous post to this blog, there is an even more dramatic decline in the rate at which young adults are finding full-time work. In May, 2000 54.3% of adults age 20-24 were employed in full-time jobs, but last month only 37.1% of adults age 20-24 were employed full-time. If today’s labor market was comparable to 2000 full-time employment of adults age 20-24 would be higher by 3.75 million. Some of these 3.75 million workers are currently working part-time while others are unemployed, and still more have left the labor force.
Young adults aren’t the only workers dropping out of the labor force or settling for a part-time job. When a vigorous economic recovery finally arrives there will be millions of underemployed and unemployed workers and labor force drop-outs looking for full-time jobs. Given the slack in the labor market and the rate of population growth, two years of employment growth of at least 500,000 full-time jobs per month would be required to restore the participation rate, the employment to population ratio, and the fraction of workers in full-time jobs to pre-recession levels. In other words 24 straight months of growth about five times faster than what we have seen of late is needed to restore full employment.