Unemployment’s Slow Burn

There’s a concerning undercurrent running through the US labor market. The unemployment rate has been steadily climbing. That’s unusual. Typically, when unemployment goes up, it spikes.

Today’s creep upward masks a dramatic increase in joblessness among certain demographics.  While headline unemployment figures paint a relatively stable picture, a deeper look at youth employment—especially among young men—reveals troubling trends.

Goodbye, High School Dishwashers

In the chart below, Charlie Biello highlights the US unemployment rate increasing by nearly a full percentage point since April 2023. It remains well below the historical average of 5.7%, but the trajectory is… peculiar.

Source: Peter Mallouk

Youth unemployment is much higher and more persistent. The US youth unemployment rate (ages 16–24) climbed to 10.5% in August 2025, up from 10% in July, though it’s been roughly stable since 2022.

Data Source: BLS

That’s only part of the story for this age group. Their labor force participation rate is dropping.  Bureau of Labor Statistics data show that only 53.1% of young people (ages 16-24) were employed during the summer of 2025, a significant drop from years past.

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In California, youth labor force participation fell from 62.3% in 2000 to just 49.8% in 2024, with unemployment rising even as fewer young people seek work. Nationally, youth labor force participation has dropped by 15 percentage points since 2000.

Data Source: BLS

What’s going on? Quite a bit, actually. First, US wages have increased roughly 25% since 2020. In California, the minimum wage went from $15 an hour in 2022 to $16.50 per hour today. The minimum wage for fast food workers increased to $20. 

These mandatory wage increases have unintended consequences. The restaurant business is hard. Profit margins are typically in the low- to mid-single digits, with labor as a top expense. Restaurants are also where a lot of young people find their first jobs. Mine was as a dishwasher in high school.

It wasn’t hard to predict automation eliminating $20/hour fast food jobs. And that’s exactly what happened: the Berkeley Research Group found that California shed 10,700 fast-food jobs from June 2023 to June 2024. And 89% of restaurants cut employee hours and replaced workers with tech during that period.

While in general, I think wages at the low end of the pay scale should be higher, I also think kids should have a chance to get a job on weekends, after school, and during the summers. I’m pretty sure I was not worth $20/hour, even in 1984 dollars, when I was washing dishes after school. I have fond memories of sneaking into the walk-in cooler for a quick sandwich made with a cow’s worth of roast beef and a lot of cheese, followed by copious quantities of soda every night. There may have been a whip-it or two as well (I was really stupid back then).

While California, as usual, is at the extreme, wages have been rising across the board ever since 2020. This is forcing owners and managers to change their operations.

In other, more white-collar industries, we may be seeing the early signs of AI’s impact. We wrote about this a couple weeks ago.

Gen Z Values

There’s another variable, one highlighted this week in The Wall Street Journal. Suzy Welch wrote an important commentary based on her research on Gen Z at NYU Stern School of Business. This group was born between 1997 and 2012, making them 13 to 28 years old today. As this group includes most of the “youth” cohort cited earlier, their unemployment rate is similar: 8.2%.

Welch, a Harvard Business School grad, former journalist, and yes, wife of the late General Electric CEO Jack Welch, took a scientific look at Gen Z’s values. She found a stark disconnect between their values and those sought by today’s businesses.

Welch reports that only about 2% of Gen Z prioritize the values most employers seek—achievement, learning, and a strong drive to work. Instead, Gen Z places higher value on selfcare, authenticity, and helping others—commendable values on their own, but when they are your top priorities, you might find it hard to thrive at work. 

Bloomberg’s Tom Keene, whom I consider the greatest living financial interviewer, named Welch’s piece his “essay of the year.” You can watch the GOAT in action with Welch here.

This disconnect is not easy to bridge, but doing so will be essential to both the economy and the economic well-being of a generation. This is yet another area in which we, as Americans, must figure out how to communicate better with people who hold opposing views. The downside of not doing so is just too terrible, and pessimism is already settling in. Only 25% of Americans expect their standard of living to improve, down sharply from 75% at the turn of the century.

Reasons For Hope

Periods of high youth unemployment historically correlate with increases in social instability, drug use, crime, and political extremism. The erosion of traditional economic optimism is especially pronounced; today, declining marriage rates and delayed family formation are compounding the demographic and economic headwinds we discussed last week.

However, the US has always been a nation of change and occasional turmoil. Yet we persevere.  Some of the changes our society faces could lead to solutions for Gen Z. Our rapidly aging population is often cited as a negative, but it will lead to increased labor demand in fields like healthcare, education, and skilled trades.

Over time, we also tend to move away from extremes. Sooner or later, businesses will unlock the code to communicating with Gen Z. And in doing so, perhaps they will also pass along their more noble values. Some of the hyper fixation on selfcare might be assuaged by employers who invest in their employees for the long term. It’s worked in the past.

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Thanks for reading,

Ed D’Agostino
Publisher & COO