With rising fears of recession, how will Gen Z fare? : The Indicator from Planet Money Gen Zers, it's time to put the TikTok away and revamp those cover letters. With murmurs of an upcoming recession, what does this mean for the newest entrants into the labor market?

Jobs Friday: Gen Z and the scars of recessions past

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SYLVIE DOUGLIS, BYLINE: NPR.

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WAILIN WONG, HOST:

This is THE INDICATOR FROM PLANET MONEY. I'm Wailin Wong. And it is Jobs Friday. New employment numbers are out today, and the U.S. economy added 372,000 jobs in June, significantly more than expected. And the unemployment rate is 3.6%, holding steady from May.

Now in other months, this might be cause for the Jobs Friday air horn. But things don't feel so great in other parts of the economy. Inflation is still high, which is prompting the Federal Reserve to hike interest rates, which is raising fears that a recession could be on the way. It's an anxious time, especially for people who haven't been through an economic downturn as working adults - people like Jade Walters, who is 22 years old and graduated from Howard University last year.

JADE WALTERS: This is just so interesting for me as a new adult that this is all the things that I'm dealing with. And I'm confused, too. And I'm still learning alongside everyone else.

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WONG: Jade is a Gen Z career coach. She shares advice with 29,000 followers on TikTok. Her generation is entering the workforce just as the recession talk is ramping up. And there's good reason for Jade and her peers to be worried. The generation before theirs still bears the scars of the last big downturn. After the break, we talk to an economist who studied the lasting effects of the Great Recession on that era's youngest workers, and we see what their experience might mean for Gen Z.

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WONG: One of the hallmarks of a recession is a large proportion of people who are available to work but can't find jobs. During the Great Recession just over a decade ago, the unemployment rate in the U.S. climbed all the way to 10%.

JESSE ROTHSTEIN: I just saw the Great Recession as this really cataclysmic event in the labor market.

WONG: Jesse Rothstein is a professor of policy and economics at the University of California, Berkeley. He says the Great Recession stood out for its long duration and slow recovery. These factors meant that young people in particular were still in bad shape even years after the recession officially ended. There's actually a term that describes longer lasting economic damage - scarring effects. Jesse has studied the Great Recession's scarring effects on people who entered the workforce during the downturn.

ROTHSTEIN: It was a bigger deal than the other recent recessions in a way that we didn't fully understand. You're carrying around these scars from having entered in a bad time that maybe affected how much you learned in your first job, maybe affected your ability to get a foot on the career ladder, but one way or another are affecting your ability to get a good job even once the economy has recovered.

WONG: It's such a visceral term.

ROTHSTEIN: I think it - yeah, I think it is. Economists aren't always that good at that, but I think it does do a good job of capturing what we're after.

WONG: Jesse focused on college graduates entering the labor market. And he wanted to look not just at young people who were trying to get jobs during the thick of the Great Recession, but also those who were jumping in while the economy was recovering in the 2010s. Jesse looked at two broad measures of the labor market - wages and the employment rate. When it came to wages, the data showed that, as you might expect, people entering the labor market during the recession made less than previous cohorts. But then, wages recovered. It was the second measure, the employment rate for new graduates entering the job market, that showed an alarming pattern.

ROTHSTEIN: There did seem to be people who started later who just never seemed to break into the labor market. It seems like it was harder than it was prior to the Great Recession.

WONG: Bottom line, it was more difficult for newcomers to get jobs even though the economy had been in recovery mode for several years.

ROTHSTEIN: I think one way to make sense of that is that there was a big queue of people who finished school during the Great Recession, during the years when the unemployment rate was just taking a really long time to recover. And they were all waiting to get into the labor market. They had maybe built up a little bit of experience. Then the labor market starts to recover. There do start to be jobs, but now employers can choose between the new graduates or somebody with several years of experience who's willing to take an entry-level job.

WONG: Jesse says once this dynamic gets established, where new graduates are losing entry-level jobs to older or more experienced workers, it becomes increasingly hard for those young workers to start their careers. And when they do get going, they're starting from behind. It's really hard to shake this recession hangover.

ROTHSTEIN: Those younger workers will soon be the older workers. And if they are continuing to kind of carry the scars of a really historically bad labor market when they entered, that's going to make us poorer for decades to come.

WONG: Jade Walters, our Gen Z career coach from earlier, she landed her first job out of college last year. She works at advertising at a tech company. Her degree is actually in health education, but she had decided close to graduation that she wanted to pursue a different career entirely.

WALTERS: I felt really lucky as just being someone in Gen Z where I can, you know, just change my career as much as I want and use this time now to figure out what I want to do. Because I always hear a lot about sometimes, some people, they'll be in a field from, like, straight out of college, and then they realize, like, 10 years later that this isn't what they wanted to do.

WONG: Jade's advertising job is her nine-to-five. And then her five-to-nine, as she calls it, is the Ninth Semester. That's her Gen Z career coaching brand. One of her most popular tips is submit your application on a Sunday so that it'll be at the top of the pile on Monday morning. Another tip - when hiring managers ask at the end of interviews, so do you have any questions for me, ask things like, what is a typical day or what does your company do to help employees on their growth journeys?

WALTERS: For Gen Z, one thing I really love about us is that when we don't feel welcomed in a space, where we'd feel like we're not growing, we leave. Like, we do not care. We will job hunt. We will find a place where we feel appreciated. Like, another big thing I realized once I started working, I'm like, oh, my gosh, I'm about to be working for, like, 40 years. This is a large chunk of my life. I want to be somewhere where I'm happy.

WONG: But this current economic moment is where the ambition of Jade's generation could really clash with the harsh realities of what economists like Jesse Rothstein are already seeing.

ROTHSTEIN: I don't think people feel like, I'm graduating in the best of all possible worlds. You know, the COVID period was a roller coaster. I don't blame people for being scared. A few months of a very low unemployment rate doesn't make it feel like it's a super secure world out there right now.

WONG: Gen Z's formative young adult years were ones of relative prosperity, an era where it was possible to job hunt and go in search of more fulfilling work experiences. That period might be drawing to an end, replaced by one where jobs get a lot scarcer. Jesse worries that if the economy does head into a recession and unemployment climbs to something like 9%, that's where today's youngest workers will face the same kind of long-term damage as their predecessors.

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WONG: Quick reminder - THE INDICATOR and Planet Money are looking for our fall and winter intern. If you are a Jobs Friday fanatic, you woke up at 8:30 Eastern this morning to check the numbers, this could be you. The internship is paid, and we would love to have you. Go to npr.org/internships. The deadline is July 17. Again, that's npr.org/internships.

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WONG: This episode was produced by Brittany Cronin and Jamila Huxtable, with engineering support from Debbie Daughtry. It was fact-checked by Kathryn Yang. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.

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