The United States may be on the verge of a recession, with the job market for young workers signaling a potential generational crisis.
Data shows the youth underemployment rate, which tracks labor underutilization among people aged 16 to 24, jumped to 17% in July, its highest level since the 2020 pandemic shock, according to Bloomberg insights shared by The Kobeissi Letter on August 16.
Over the past two years, the rate has climbed nearly five percentage points, marking one of the steepest increases in decades. Notably, the pace of deterioration now mirrors conditions seen during the 2001 recession and the early stages of the 2008 financial crisis.
For starters, the underemployment measure includes the jobless, part-time workers seeking full-time roles, and those loosely attached to the labor force.
Young adults are typically hit first in downturns, making the latest spike a clear warning sign of broader labor market weakness.
Underemployment declined to historic lows through the mid-2010s before the pandemic, but its rebound since 2023 signals fading momentum. If the trend continues, policymakers may face a labor downturn that risks spilling into the broader economy.
Concerning U.S. jobs report
In recent months, the U.S. job market has shown further signs of strain. For instance, job growth in July came in weaker than expected, with nonfarm payrolls increasing by 73,000, well below the 100,000 estimate, though stronger than June’s revised total of just 14,000.
Revisions to prior months revealed an even softer trend. Payrolls in May and June were cut by a combined 258,000, with May reduced to 19,000 and June to 14,000. Meanwhile, the unemployment rate rose to 4.2%, matching forecasts but underscoring the labor market’s fragility.
As reported by Finbold, economist Mark Zandi echoed concerns, warning that job losses are likely ahead as labor conditions deteriorate.
He cited a declining labor force participation rate and a shrinking foreign-born workforce as factors tightening supply. At the same time, an economy-wide hiring freeze is emerging, hitting recent graduates hardest.
Overall, Zandi maintains that the United States faces the risk of a recession, even as the odds of a severe downturn have eased somewhat.
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