Unexpectedly Intriguing!
13 January 2009

The Economic Detective Strikes Again! Our economic detective work continues today, after having determined that where teenagers are concerned, something "broke" in the U.S. economy sometime between November 2006 and January 2007. Whatever it was that broke led to hundreds of thousands of teenagers leaving the ranks of employed individuals in the U.S.

Since we've already shown that the number of employed teens as a percentage of the total number of individuals counted as being employed in the U.S. has declined since that time, today we'll take a closer look at the victim, performing an economic autopsy so to speak, to consider what that decline in the percentage representation of teens in the U.S. means in terms of actual numbers.

 Number of Age 16-19 Population, January 2005 through December 2008 We'll first consider the overall trend in the size of the U.S. Age 16-19 population. The chart to the left indicates that the number of working-age teens in the U.S. has increased steadily over the period from January 2005 through December 2008, although the BLS' measure of the population isn't so steady. Here, we see that the BLS apparently adjusts its data each year in January, evident in the shifts upward and downward in the number of teens the government agency records as existing in each year.

Number of Age 16-19 Civilian Labor Force Members, January 2005 through December 2008 As you might expect, with a steadily increasing population over time, would tend to lead to an increasing number of Age 16-19 year olds becoming members of the U.S. workforce. In fact, in the chart to the right, that's exactly what we see for both 2005 and 2006. But then we see an unexpected break in this expected pattern, beginning roughly around November 2006, when the number of members of the Age 16-19 workforce abruptly begins to decline.

Here, we see that decline accelerate beginning in January 2007, before adjusting to a slower rate of decline after August 2007. Remarkably, that sharp decline occurred well before the expansion of the business cycle peaked, as recently determined by the National Bureau of Economic Research when they pegged December 2007 as the beginning of the current recession.

In effect, this decline might be considered evidence of a blunt force trauma acting upon the employment status of U.S. teens!

Number of Employed Age 16-19 Individuals, January 2005 through December 2008 Since the Age 16-19 Civilian Labor Force includes the number of teens both counted as being employed and those counted as being unemployed, we'll next look at just those teens counted as being employed. The chart to the left confirms the observation of a "blunt force trauma" occurring around November 2006 to January 2007, after which, the number of employed teens bled out of the U.S. workforce.

Decrease in Number of Working Teens, November 2006 through December 2008 The chart to the left gives the number of teens who have "bled" out of the U.S. economy since the proximate November 2006 "break" point. Here, we see that after the initial break, 567,000 fewer teens were counted as being employed in August 2007. After this low point however, the number of working teens rebounded back up to where only 294,000 fewer than November 2006 were employed in October 2007. The overall decline then resumed, ending 2007 at a level 389,000 below the November 2006 level. All this decline in the number of working teens occurred when the U.S. economy was still expanding, which according to the NBER, it did all through 2007.

As we can see, some 1.02 million fewer teens are employed as of December 2008 compared to November 2006.

But are these individuals counted as being unemployed? We noted earlier that the size of the Age 16-19 Civilian Labor Force includes both the number of employed and unemployed members of this group. We wondered how the unemployment rate might reflect the changes we observe since November 2006. The chart below gives both the change in the number of 16 to 19 year olds counted as being unemployed since November 2008 (on the left scale) and the recorded Age 16-19 unemployment rate (right scale). The total number of Age 16-19 members of the Civilian Labor Force counted as being unemployed in November 2006, which provides the base against which the change in number of unemployed is measured in the chart below, is 1,089,000:

Change in Age 16-19 Number of Unemployed and Unemployment Rate, November 2006 through December 2008

Since the BLS' unemployment data only counts those who were dismissed from their jobs by their employers, such as through layoffs, the data in this chart combined with the observed decline in the number of working teens in the period from November 2006 onward tells us something very important about the nature of the "blunt force trauma" that affected working teens in the U.S. What it tells is is that the decline in teen employment levels is largely the result of a disappearance of jobs for teens.

We can confirm this in the chart above by observing that even when the number of employed teens began decreasing sharply after November 2006, the change in the number of teens counted as being unemployed actually dropped for several months and didn't begin growing in earnest until May 2008, after the economy had entered into recession.

What this tells us is that whatever it was that caused the job market for teens to break down between November 2006 and January 2007, the blunt force trauma applied was directed at the supply of jobs created or available for teens to fill, rather than jobs that already existed.

And just who, or what, could do that? We'll soon have to line up the potential suspects....


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