Why Teenage Workers Are Leading the Recovery

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The job market recovery is looking better for 2023 and 2024, even while this year's forecasts need to be reined in a bit. The best evidence for the optimistic outlook is coming from a surprising place: teenagers.

The last two jobs reports poured cold water on the hope that we could add a million jobs or more for a few months in a row, which means a full employment recovery to pre-pandemic levels is going to take longer than we thought. But booming employment trends among teenagers suggests that over the next few years, strong demand for workers should flow through into higher levels of labor-force participation than we saw in the late 2010s.

What makes teenage employment useful to study right now is that teenagers are less affected by the factors holding back labor supply than any other demographic. If they lived at home with their parents, they weren't eligible for economic impact payments. If they were full-time students, they'd be ineligible for unemployment insurance, making enhanced benefits a nonfactor. They're unlikely to be parents squeezed out of the labor force by closed schools or a lack of child care. They're obviously not older workers who may have accelerated retirement plans during the pandemic. And teens were less likely to get seriously ill from Covid-19, and so perhaps less likely to avoid working for health-related reasons.

They're also more likely to be drawn to the types of jobs that employers are desperate to fill right now. Teenagers lack the greater levels of education and experience that allow older workers to take on roles ranging from corporate executives to home health aides. Teens are more likely to seek lower-paid service jobs, perhaps on a part-time basis, than any other age group.

In May, for the first time in history, the jobless rate for teenagers was lower than the rate for workers aged 20 to 24. On some level, this defies the laws of economics: All else equal, employers would usually rather hire slightly older workers who have more skills and experience. Typically, the unemployment rate for teenagers is at least 5% higher than the rate for 20- to 24-year-olds, indicating that even slightly older workers are still holding off on taking jobs in a way that teenagers aren't.

The surge in teen employment isn't statistical smoke-and-mirrors — it's showing up in other measures of labor-force participation. While levels for prime-age and older workers remain far below their pre-pandemic benchmark, they've jumped for teenagers. The employment-to-population ratio for teenagers hit a 13-year high in May. Teen labor-force participation ticked down a bit from April to May but remains at higher levels than it was at any point in the 2010s.

So what the past two jobs reports are showing us is that there's strong labor demand evident in data on teen employment, while labor-supply shortages are showing up in employment levels for everyone else.

We should know over the next few months which constraints on the labor supply are temporary — closed schools, fear of catching Covid-19, enhanced unemployment benefits — and which ones are more structural. It's understandable if employers are reluctant to pay more for workers in June when it's possible these labor shortages only last for another two or three months. But to the extent the shortages persist past Labor Day, we should trust the market to sort things out as long as labor demand remains strong.

Right now we're seeing a relatively easy solution to increasing labor-force participation in lower-paid service industry jobs: Just pay more and be willing to hire teenagers. To bring back older workers who are in a variety of industries with different requirements, it might need a mix of tweaks — higher pay, flexible work schedules, on-site child care, employers considering a broader universe of candidates and more on-the-job training. Employers will figure this out over time.

The key is sustaining robust labor demand. If we're seeing employment dynamics improve for teenagers after a generation of declines, there's no reason we shouldn't see progress for other groups of workers as pandemic-related labor-supply constraints abate over the coming months.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist and the founder of Peachtree Creek Investments. He's been a contributor to the Atlantic and Business Insider and resides in Atlanta.

©2021 Bloomberg L.P.

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