Unexpectedly Intriguing!
11 November 2014

The October 2014 Employment Situation report was easily the best single jobs report of the past seven years. It is also the first jobs report since the total employment level in the U.S. previously peaked in November 2007 that the jobs situation for U.S. teens between the ages of 16 and 19 showed a meaningful improvement.

But don't take our word for it. The chart below visualizes that improvement as the change in the number of employed Americans by age group for each month since November 2007.

Change in the Number of Employed by Age Group Since Total Employment Peak in November 2007, through October 2014

What we see is a really remarkable surge in the number of teens (Age 16-19) who are now counted as being employed - finally breaking out of what has been a five year long doldrums of non-improvement for this demographic group, which itself had followed a two year long period of a worsening jobs situation coinciding with the December 2007-June 2009 recession.

We think that the break out of teens from the job recovery basement in October is the result of falling fuel prices in the U.S., where they have finally fallen both enough and for long enough for the benefits to start positively affecting the jobs market. Here, the falling prices for fuel have effectively increased the discretionary income of consumers, allowing them to spend more on other things.

U.S. Average Monthly Fuel Prices, November 2007 through October 2014, Nominal and Real (September 2014 U.S. dollars)

That increase in income available to spend on other things is now showing up in the form of increased demand and revenue at a large number of businesses across the U.S., particularly in the leisure and hospitality sector, or more particularly, in food and drinking services. Those businesses, in turn, have begun to pull more marginal workers onto their payrolls to keep up with the increased demand.

When it comes to marginal workers, there’s no demographic group that is more marginal than teens, who are the least educated, least skilled and least experienced members of the labor force. In October 2014, they accounted for nearly 39% (266,000) of the increase in the number of employed from the previous month (617,000).

Meanwhile, young adults between the ages of 20 and 24 also saw a similar increase in their numbers among the employed (262,000), as the number of Americans employed within this age group finally surpassed its November 2007 total. This group would represent the second-most marginal group of American workers.

Combining to account for 77% of the total increase in the number of employed since September 2014, the addition of these Age 16-24 individuals to the ranks of the employed would also account for why there was little to no wage growth for workers overall for the month, which has been the biggest knock against the October 2014 employment data. We believe that the teens being hired would be coming into the job market at or near the minimum wage level, particularly for the industries into which they are being hired.

The interesting thing about this aspect of the employment situation is that while individual wages would see little to no increase, household and family income would.

Looking back over the data, we note that the breakout for October 2014 represents the second major jobs breakout this year. The first appears to have taken place for adults (Age 25+) back in February 2014. That earlier break out is most likely tied to the termination of emergency extended unemployment insurance benefits at the end of December 2013, which forced a large number of individuals in this older demographic group to finally accept available jobs to replace that welfare-based source of income, which really only served to unnecessarily prolong their unemployment.


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