Skip to main content

The Globe and Mail

Demographic flip endangers U.S. jobs recovery

People wait in line to enter the NYCHires Job Fair in New York, Feb. 24, 2010.

© Shannon Stapleton / Reuters/Shannon Stapleton / Reuters

About four million people under the age of 55 may be ready to start seeking a job in the United States, according to a Breakingviews analysis. Yet, the proportion of older folks working also has increased since before the crisis hit – and they might not be so quick to retire. As the economy improves, these two trends could wreak havoc on the U.S. unemployment rate.

The decline in joblessness – and whether it can continue – is an economic and political hot-button issue. The U.S. unemployment rate has tumbled to 8.3 per cent from 10 per cent in a little over two years. Many fear, however, that the volume of people who abandoned the work force could return in droves. Analysts at Barclays last week called this theory an "urban legend," and instead blamed retiring older Americans for the drop in labour market participation.

Data from the Bureau of Labour Statistics (BLS) suggest something more complex. Instead of young people moving into the work force and older workers leaving it, the reverse has happened over the past five years. For those under 55, the labour participation rate for every BLS segment (16-17, 18-19, 20-24, etc.) has decreased. Applying the 2006 rate to the population for each segment implies about four million folks are on the sidelines. In theory, if they all started looking for work tomorrow, their collective unemployment rate would jump from 9.5 per cent to over 12 per cent.

Story continues below advertisement

Meanwhile, for every BLS grouping of those 55 and over, the labour participation rate has increased. And there's no reason to think they'll be decamping any time soon. Equity in their homes has evaporated and the stock market has taken a bite out of nest eggs. Even if the 1.3 million older workers who might not otherwise be on the job – again based on the 2006 rates of work force participation – were to retire, it wouldn't open enough spots to accommodate their younger counterparts.

This demographic flip suggests that, at best, the decline in the unemployment rate will slow, or potentially stop. If the improving economy encourages disillusioned job-seekers to hunt anew, it could push the rate up again. Either way, the U.S. jobs problem looks far from solved.

Report an error
Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.