How Much Do Young Adults Benefit from Tight Labor Markets?

KEY TAKEAWAYS

Following sharp job losses in early 2020 during the COVID-19 recession, the U.S. experienced an extended period of strength in the labor market. This sustained labor market strength has been highly effective at helping young workers obtain employment opportunities, though gains differ across metro areas.
Early in the recovery from the COVID-19 recession, young adults and labor market new entrants — who have less work experience and fewer job-specific skills — saw larger employment gains in those metro areas where jobless rates had peaked lower.
In the tight labor market that followed, employment gains among young adults and new entrants were greatest in those metro areas where unemployment remained low (i.e., below 3%) for significant periods (i.e., longer than 36 months).
Employment gains made by young workers during strong labor markets do not necessarily insulate them from softening labor markets in the future.

The U.S. labor market has experienced one of the longest stretches of low unemployment in modern history. As of mid-2026, the national unemployment rate has remained at or below 4.5% for nearly five years. Following the sharp job losses of the COVID-19 recession,The COVID-19 recession began in February 2020 and ended in April 2020, according to the National Bureau of Economic Research. unemployment fell rapidly and has stayed low across much of the country.

Periods of strong labor demand are particularly important for young adults entering the workforce.See, for example, Eliza C. Forsythe’s 2022 AEA Papers and Proceedings article, “Youth Hiring and Labor Market Tightness”; Till von Wachter’s 2020 Journal of Economic Perspectives article, “The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources”; and our June 2026 On the Economy blog post “It’s (Still) the Business Cycle: Young Adult Workers in a ‘Low-Hire, Low-Fire’ Labor Market.” Compared with older workers, young people typically have less work experience, fewer job-specific skills and smaller professional networks. As a result, they are often among the first workers to lose jobs during economic downturns and among the last to benefit when labor markets begin to strengthen.See, for example, David N.F. Bell and David G. Blanchflower’s 2011 Oxford Review of Economic Policy article, “Young People and the Great Recession”; Sher Verick’s 2009 IZA Discussion Paper, “Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn”; the 2010 OECD report Off to a Good Start? Jobs for Youth; and Hilary Hoynes, Douglas L. Miller and Jessamyn Schaller’s 2012 Journal of Economic Perspectives article, “Who Suffers during Recessions?”

Key Points of Our Analysis

Our analysis of sustained labor market strength in recent years continues to show such conditions play a meaningful role in helping young workers gain employment experience and establish more-robust connections to the jobs market. Specifically, we found:

Young adults and labor market new entrants experienced larger employment gains in those metro areas that avoided the most severe unemployment spikes during the COVID-19 pandemic.
Young adults and new entrants generally found job opportunities more readily in areas that maintained low unemployment rates for longer periods.
Strong labor markets help young adults gain employment opportunities, but prior gains do not necessarily insulate them from future economic slowdowns.

Measuring Labor Market Tightness across Metro Areas

To better understand how labor market conditions affect young workers, we examined 387 metropolitan statistical areas between April 2020 and May 2026.

We focused on two measures of labor market strength:

The severity of local unemployment during the COVID-19 recession
The length of time that local unemployment rates remained exceptionally low, defined as below 3%

We then examined employment outcomes for young adults — defined in this blog post as those ages 16 to 24 — with particular attention on labor market new entrants, who have relatively little work experience. We defined new entrants as those with no more than 10 years of potential labor market experience and no more than a high school diploma.

While labor markets across the country improved after the pandemic, the pace and persistence of recovery differed considerably across metro areas.

Areas Hit Hardest Saw Weaker Recoveries for Young Workers

One clear pattern emerged from the analysis: In metro areas where unemployment peaked at relatively lower levels — indicated in the following figure by the smallest change between April 2020, when unemployment in the U.S. reached a high mark, and October 2021, when the national rate had decreased to 4.5% — the employment-to-population ratio for labor market new entrants rose nearly 21 percentage points. In contrast, the gains in employment-to-population ratio for this demographic were only about 12 percentage points in metro areas that experienced the highest unemployment rates during the COVID-19 recession.

This finding is consistent with a long-standing labor market pattern: Deep recessions can leave lasting effects on younger workers. When employment opportunities disappear, young adults lose valuable chances to build job skills, accumulate experience and establish work histories.

The results also suggest that a strong recovery alone may not fully offset the damage caused by especially severe local downturns.

Sustained Tight Labor Markets Generated Additional Gains

Rapid recovery from the employment effects of the pandemic is only part of the story. In the period that followed, many metro areas experienced prolonged stretches of exceptionally low unemployment. We found that young adults and labor market new entrants generally performed better in areas that maintained low unemployment rates for longer periods.

In metro areas that never experienced unemployment of less than 3%, the employment-to-population ratio for new entrants was essentially unchanged during the tight labor market period from October 2021 to May 2026. (See the figure below.) In contrast, employment-to-population ratios for new entrants rose by roughly 3 percentage points to 5 percentage points in those metro areas where unemployment remained below 3% for extended periods (i.e., longer than 36 months). The tight labor market from October 2021 to May 2026 covers periods of both relative strengthening (October 2021 to April 2023) and weakening (April 2023 to May 2026).

When employers have difficulty filling positions, they often expand hiring to workers who may otherwise face greater challenges finding jobs. Young adults entering the workforce are frequently among those beneficiaries.

Tightness Helps, But It Does Not Eliminate Future Risks

Labor market conditions do not remain at their strongest forever. Since 2023, labor markets in many areas have cooled. An important question is whether metro areas that previously experienced exceptionally tight labor markets were better protected from this weakening.

The evidence suggests any protection was limited. Though some metro areas continued to post gains, we found no consistent pattern indicating that previous labor market tightness prevented declines in employment among young workers once labor demand weakened from its April 2023 peak. Strong labor markets appear highly effective at helping young adults obtain employment opportunities, but those earlier gains do not necessarily insulate them from softening labor markets in the future.

Why These Findings Matter

The transition from school to work is one of the most important stages of a young person’s life. Early employment experiences shape workforce attachment and future earnings. Our findings from studying the current economic expansion continue to indicate that sustained periods of low unemployment can provide young adults with meaningful opportunities, particularly young adults with less education and limited work experience. Strong labor markets help these workers gain a foothold in the labor force.

However, our results highlight an important limitation: While labor market strength creates opportunities, it does not completely reverse the effects of previous severe downturns or protect young workers from future slowdowns.

Notes

The COVID-19 recession began in February 2020 and ended in April 2020, according to the National Bureau of Economic Research.
See, for example, Eliza C. Forsythe’s 2022 AEA Papers and Proceedings article, “Youth Hiring and Labor Market Tightness”; Till von Wachter’s 2020 Journal of Economic Perspectives article, “The Persistent Effects of Initial Labor Market Conditions for Young Adults and Their Sources”; and our June 2026 On the Economy blog post “It’s (Still) the Business Cycle: Young Adult Workers in a ‘Low-Hire, Low-Fire’ Labor Market.”
See, for example, David N.F. Bell and David G. Blanchflower’s 2011 Oxford Review of Economic Policy article, “Young People and the Great Recession”; Sher Verick’s 2009 IZA Discussion Paper, “Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn”; the 2010 OECD report Off to a Good Start? Jobs for Youth; and Hilary Hoynes, Douglas L. Miller and Jessamyn Schaller’s 2012 Journal of Economic Perspectives article, “Who Suffers during Recessions?”