The Long Road Back to Full Employment

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.

Comments

  1. You may be interested in my article, entitled: “Full Employment: Let Me Count the Ways.” http://earthchurch.blogspot.com/2011/12/full-employment-let-me-count-ways.html

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