Comment: For Gen Z’s job hopes, we’re already in a recession

By Conor Sen / Bloomberg Opinion

Gen Z is right to have negative feelings about the economy. Not only were its oldest members entering the workforce as the pandemic struck, but those in their early to mid-20s are also now bearing the brunt of a labor market that’s largely been frozen in place for the past two years.

A “low hiring, low firing” job market works reasonably well for older workers, who have been in their roles for some time and are protected by the low-firing dynamic. But the low-hiring environment looks and feels like a recession to those just entering the workforce. What they urgently need is a meaningful pickup in hiring, something that doesn’t appear to be on the immediate horizon.

An age-based comparison of unemployment rates shows how much harsher this economy has felt for young workers since the labor market started cooling off. The jobless rate for the 20-24 age group has risen by 2.8 percentage points to 8.3 percent since a recent low in April 2023. That’s 7 times the deterioration experienced by prime-age workers between the ages of 25 and 54, who saw unemployment rise to 3.5 percent from 3.1 percent.

Notably, over the past 60 years, the U.S. economy has been in a recession every other time the unemployment rate for the 20-24 cohort has risen by this much over a two-year period. But in a recession, the Federal Reserve aggressively lowers interest rates to spark growth and hiring. That’s not the case now. Solid real gross domestic product growth in 2024 and too-high inflation have reined in the Fed, which does not see the labor market as needing immediate support.

Meanwhile young workers are struggling. Tuesday’s Job Openings and Labor Turnover Survey showed that the private sector hiring rate in January remained at levels consistent with what we saw in the early 2010s, when the economy was still sluggish in the aftermath of the Great Recession. Hiring has generally been weak since the middle of 2023.

It doesn’t help that stories abound about the effect artificial intelligence will have on white-collar jobs. Many entry-level roles involve the kind of low-stakes assignments that generative AI is best at, Molly Kinder, a fellow at the Brookings Institution who studies the impact of AI on work and workers, wrote in a recent Bloomberg weekend essay. That puts at risk early career jobs in fields such as law, consulting, media, marketing technology and the creative industry, she wrote.

It’s no wonder that even Gen Zers with jobs feel stuck; 80 percent of those in white-collar roles say it’s difficult to find a better position than their current one, at least 11 percentage points higher than other age cohorts, according to a recent Harris Poll survey for Bloomberg News.

Such trends have negative implications that will last for years. Americans in their 30s and 40s can attest to this given their own experience with weak labor markets following the 2008 financial crisis. Research shows that young people who experience unemployment see their earning potential negatively impacted for years due to lost opportunities to gain experience and develop skills.

Outside the labor market, Gen Zers have had to contend with more costly education, housing and everyday living. Those between the ages of 22 to 24 carried credit card balances in 2023 that were 26 percent higher, on an inflation-adjusted basis, than the same age cohort a decade ago, according to credit reporting agency TransUnion. When it comes to homeownership, the key to building wealth for most of America, the median age of first-time homebuyers has risen to a record 38 years, compared with the 1980s, when the typical first-time buyer was in their late 20s.

It all helps explains why young people might have a live-for-today mentality when it comes to consumption, breaking their budgets to spend on experiences such as concerts and travel, and in some cases, taking on debt to do so. If it feels like homeownership is out of reach and the frozen labor market makes it difficult to get ahead, it’s understandable that Gen Z wants to focus on making the best of present circumstances rather than betting on — and saving for — a future that doesn’t seem bright.

Older workers may well advise that difficult labor markets don’t last forever, but the path to improvement in 2025 looks narrow at the moment. Economic vibes have darkened as the Trump administration creates uncertainty with its trade agenda, and some economists have raised the odds of a recession.

Despite this, the Fed has signaled that interest rate cuts aren’t imminent until policymakers have more visibility on how tariffs will affect inflation. Young workers need a pro-growth policy mix from the federal government and the central bank, and until that comes, this labor market rut will probably get worse.