The unemployment rate for Americans aged 18-29 stood at 13.1 percent during the month of January, while the overall unemployment rate was 7.9 percent, according to the Bureau of Labor Statistics.
The situation for younger workers has improved little since the 2007 financial crisis and recession sent unemployment rates spiraling upward.
“They have disproportionately high rates of both long-term and short-term unemployment,” writes the Federal Reserve Bank of San Francisco in a new letter examining the short and long-term effects of unemployment.
The percentage of short-term unemployment for workers 16-19 is well over double that of the next closest group, which happens to be workers aged 20-24.
“Short-term unemployment is most frequent among younger workers, the less educated, nonwhite workers other than Asians, and people who previously worked in construction,” reports the SF Federal Reserve.
The news of increased unemployment came after reports that the economy actually shrank in the fourth quarter of 2012.
The concern about the long-term unemployed, as pointed out by the SF Federal Reserve, is “that they may face unusually weak job prospects that will keep the unemployment rate elevated even after the economy has regained the ground lost in the recession.”
Younger workers who struggle to find employment now will face a significant disadvantage finding work in the future.
This reality is coupled with the fact that more students than ever are graduating college piled with student debt. According to credit bureau TransUnion, the average student graduate is carrying $23,829 in debt — a 30 percent increase in just five years. On top of that, more than half of those student loans are in deferral status, meaning students are delaying payment until they can otherwise afford to pay.
“I think a few more years and it’s going to be a general crisis,” said Barry Bosworth, an economist at the Brookings Institution, to Time.
A recent study by the Center for College Affordability and Productivity found that 37 percent of college graduates are doing work that did not require their expensive degree.
“Just as a bachelor’s degree gives current applicants for bartender jobs an edge over those with just a high-school diploma, so a master’s degree holder will have an advantage over those with a mere bachelor’s degree,” the study’s authors write.
“My generation is suffering disproportionately,” said Terence Grado, director of National and State Policy at Generation Opportunity.
The result of this economic condition will manifest in a number of ways.
Former Reagan budget director David Stockman suggested the younger generation’s debt burden will inhibit their ability to buy a home until much later, thus contributing to the stall in the housing market.
Signs from National Association of Home Builders maintain confidence in the housing market is steady, though artificially low interest rates and speculation have Stockman concerned.
“As soon as the Fed has to normalize interest rates, housing prices will stop appreciating and they’ll probably head down,” he said.
Another trend that may start to show its true power is the decline in American birthrate. Though a natural trend during recessions, the birthrate has not seemed to rebound with the economy.
“Some analysts now wonder if the unprecedented scale of early indebtedness stemming from student loans, affecting nearly one-quarter of the overall US populace of childbearing age, has become a permanent deterrent to parenthood,” the Christian Science Monitor reports.
28-year-old recent law school graduate Karen Hu is facing this very dilemma. While she and her husband, a software programmer, have begun considering having kids, there are a few things holding them back. For one, Hu has had difficulty finding a good job in the post-recession economy.
Couple that with her student debt of $164,000 with monthly payments of $818, “Children just don’t fit into that scenario,” Hu says.
Pew Research Center reported at the end of 2012 the number of women of the childbearing age who are actually having babies is just 63 per 1,000 women — nearly half the rate during the baby boomer era.
“This is something that we have not had during earlier recessions,” Chris Christopher, senior economist at IHS Global Insight, says of the number of young adults with student-loan debt. Christopher suggest that if college costs keep rising while students borrow heavily to pay for education, a decline in birthrate may become the “new normal.”
“This is a real monkey wrench in the works of our families and economy,” Christopher said.
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