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One in Five Young Adults Is Neither Working Nor Studying in U.S.

Bloomberg logoBloomberg 6/26/2021 Augusta Saraiva

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Almost one in five young adults in the U.S. was neither working nor studying in the first quarter as Black and Hispanic youth remain idle at disproportionate rates.

In the first three months of the year, about 3.8 million Americans age 20 to 24 were not in employment, education or training, known as the NEET rate, the Center for Economic Policy and Research said in a report. That’s up by 740,000, or 24%, from a year earlier, before many lost their jobs or opted to defer college enrollment as campuses shut down at the onset of the Covid-19 pandemic.

Racial Gap © Bloomberg Racial Gap

Inactive youth is a worrying sign for the future of the economy, as they don’t gain critical job skills to help realize their future earnings potential. Further, high NEET rates may foster environments that are fertile for social unrest.

The increase last quarter appears to be driven largely by joblessness, while school attendance rose moderately as campuses started to reopen, according to the CEPR study. Young adults are still experiencing double-digit unemployment rates.

“Current and ongoing recovery efforts need to do more to ensure that young adults in today’s diverse working class can improve their long-term prospects in the labor market and prosper in the years ahead,” said CEPR’s Simran Kalkat, an author of the report.

While the NEET rate has eased from its April 2020 peak, progress on reducing racial disparities hasn’t been as even. Almost a quarter of Black young adults were inactive last quarter, up from 20.9% in the same period of 2020. The rate for Hispanics in that age group was just under 20% and about 16% for White Americans.

chart: Young Americans see slow recovery as unemployment rate remains elevated © Bloomberg Young Americans see slow recovery as unemployment rate remains elevated

For the first time in history, the jobless rate for teenagers in May was lower than the rate for workers age 20 to 24. However, the unemployment rate for those in their early 20s has improved over the last six months to 10.1% from 10.7%.

The jobs report next week will provide insight as to whether states ending pandemic unemployment benefits will encourage young adults to return to work. It will also show if there are more opportunities in lower-paid service jobs as the economy continues to reopen, which teens are likely to apply for.

chart, line chart: Idle Hands © Bloomberg Idle Hands

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