Smells Like Teen Unemployment

The possibility that Artificial Intelligence is already leading to job loss among young college graduates is hard to square with the fact that employment has fallen even more for young noncollege workers, whose jobs are less likely to be exposed to disruption from AI.

There is another data point making me skeptical that AI is behind the labor market woes of young people: The unemployment rate for teenagers (ages 15–18) has risen more than for any other category of young workers. From its post-pandemic low, teenage unemployment has climbed 4 percentage points, compared to the 1.5 percentage point increase for recent college graduates.

Is it plausible that the cause of these trends is primarily AI? In other words, how likely is it that AI is the main cause of employment struggles not just for recent college graduates, but also noncollege youths and even teenagers?

What do teenagers do?

When looking at the kinds of entry-level, white-collar “laptop” jobs that recent college graduates tend to do, it is natural to wonder if AI is playing a role in the lack of hiring. The same is not true when looking at the kinds of work that teenagers do.

The industries that hire teenagers are simply not the ones that AI is likely to disrupt by displacing a large share of workers. Of the teens who were employed from 2022 through 2024, for example, a combined 75 percent of them worked in Accommodation and Food Services; Retail Trade; Arts, Entertainment, and Recreation; and Health Care and Social Assistance. ChatGPT can do a lot of things, but it can’t help if you want fries with that.

Measures of AI exposure at the occupation level tell a similar story. According to three separate measures of occupational AI exposure from influential research papers, only a small share of teens — between 3.8 and 8 percent, depending on the measure — are in the most AI-exposed occupations.

To whatever extent the struggles of teenage workers have the same cause as the employment struggles of other young adults, that cause is almost certainly AI.

Side note: Are the kids alright though?

Closer scrutiny of the teen labor market reveals an interesting wrinkle in the story. By one key metric, conditions are simply back to what they were before COVID.

The employment rate for teenagers, which is the share of all teens who are employed, started surging in 2021 as the pandemic recovery took hold and climbed far above its pre-pandemic high.¹ It finally peaked in early 2023 before subsequently falling to where it is now, roughly consistent with its level from before the pandemic.

Put another way, the labor market for teens has indeed weakened, but only as a reversion to a historically normal level, and a pretty strong one at that.

Contrast the teen story with employment for young adults. The employment rate for both college and noncollege young adults (ages 22–25) barely recovered to its pre-pandemic level before stagnating and then falling again in recent years.

Why teen employment rose to greater heights during the pandemic than young-adult employment is itself an interesting question. Part of the story likely has to do with post-pandemic policies, which by design made it easier to not work for people who benefited from them — a group that largely excluded teens. Stimulus checks went to their parents. Teens mostly never qualified for expanded unemployment insurance. And because most teens live with their parents, they get nothing from an eviction moratorium. Nor do people who haven’t been to college yet benefit from pauses in student loan payments.

Still, the relative resilience of the teen labor market is consistent with the fact that it has deteriorated in recent years, just as the labor markets for recent college graduates and noncollege young adults have deteriorated. Something is damaging the labor market for young people. If, as I have already argued, that something is unlikely to be AI, then what is it?

Low Hire, Low Fire

I have to admit that current labor market conditions are kind of weird. This is not a normal business cycle.

In addition to the struggles of young workers, another sign of weakness for the overall labor market is the slowdown in real and nominal wage growth. The quits rate, which tends to climb during strong labor markets as workers leave their jobs for better opportunities, is down from its post-pandemic highs. And interest rates are probably still above neutral, meaning that the Fed still has some pressure on the brakes of the economy as it tries to fight inflation.

On the other hand, the prime employment rate, which is the share of all adults aged 25–54 who are employed, has moved down only slightly from its peak. Total unemployment has inched up, but only a bit. Taken by themselves, and in the context of previous historical periods, these two measures would suggest a healthy environment for jobs.

One way to summarize this bizarre labor market is that real weakness has crept into it, but it seems concentrated almost entirely on the youth. Just why the youth are bearing the brunt is unclear, an ongoing economic mystery.

For teenagers, one possible contributing factor is that because their employment rate climbed so high after the pandemic, it thus had the farthest to fall. But that point doesn’t resolve why youth of all kinds, including groups that didn’t see a post-pandemic surge, have also experienced these deteriorating conditions. Teenagers are hardly the only canary in this coalmine.

Time to Zoom Out

Somewhere between the economic measures showing weakness and those showing strength is the middling reality of the low hire and low fire economy, in which employers are not laying off workers but neither are they hiring many of them. The lack of visibility into the economic future has left businesses paralyzed by a generalized uncertainty.

There are plenty of good reasons for it: tariffs that move up and down violently, wars abroad and the resulting shocks to energy prices, interest rates that might go up or down, high levels of deportations, and — yes, it’s fair to include — the unknowable effects of AI on the economy and society.

But while AI is a possible cause of uncertainty, one of several, it’s important to recognize that employers not hiring because they are frozen by AI uncertainty is not the same thing as AI replacing the tasks of young workers. Those are two different stories.

Economists and researchers and journalists are mostly focused on the story of task displacement. They are constantly trying to assess how real it is, whether it has started, how far it will go, which jobs are vulnerable to it, and so on.

I think it’s time to zoom out and instead look at AI uncertainty and also the many other types of possible macro uncertainty the economy now confronts. Given the mystery surrounding youth labor-market weakness, it would be helpful to widen our scrutiny beyond the question of which tasks performed by recent college grads might someday be taken by AI, and instead investigate the strange macroeconomy we are now living through.

See our GitHub with replication code here.

1. The employment rate is the share of everyone in a given population who has a job. It is a more comprehensive measure than the unemployment rate, which does not account for people without a job who are not looking for one.