Friday, November 7, 2014

JOBS | Unemployment by Age Group–Two Problems

The story in the New York Times by Floyd Norris this morning, first published yesterday, warns about the unemployment data released this morning by the BLS. He says the unemployment data are complicated:
It is not simply a matter of whether a member of the household was working during the week covered by a monthly survey. Was a person without a job looking for work? If so, that person is counted as unemployed. If not, the person is deemed not to be in the labor force. Further questions are meant to determine if that person was not looking because he or she was discouraged about the chances of finding a job. If so, that person goes into a category that is included in a different indicator of unemployment.
I would like to illustrate his point with a look at a detailed table from today's release by the BLS, which is headlined by a 0.1 percentage point reduction of the unemployment rate to 5.8 percent - good news. The 5.8 percent rate is an average of all age groups. The rate is much lower, barely above 4 percent, for people who are 35 and over. It is much higher for young people under 25. Only for the 25-34 age group is the unemployment rate even a good approximation.

 Chart 1. Household Survey Unemployment Data by Age Group
From Table A-10, Selected unemployment indicators, seasonally adjusted
Age Group No. unemployed, '000 Unemployment rates, percent
Oct.
2013
Sept.
2014
Oct.
2014
Oct.
2013
June
2014
July
2014
Aug.
2014
Sept.
2014
Oct.
2014
Total, 16 years and over 11,140 9,262 8,995 7.2 6.1 6.2 6.1 5.9 5.8
16 to 17 years 471 395 459 23.8 23.3 23.1 23.7 20.9 22.2
18 to 19 years 788 741 634 21.1 19.3 18.8 17.8 19.8 16.8
20 to 24 years 1,909 1,785 1,654 12.2 10.5 11.3 10.6 11.4 10.5
25 to 34 years 2,426 2,101 2,126 7.2 6.5 6.6 6.9 6.2 6.2
35 to 44 years 1,857 1,410 1,439 5.7 4.7 4.8 4.8 4.3 4.4
45 to 54 years 2,005 1,401 1,360 5.9 4.2 4.2 4.3 4.1 4.0
55 years and over 1,813 1,332 1,384 5.4 4.4 4.5 4.6 3.9 4.1

What are we to make of this? The article by Floyd Norris points the way to explanations of the data that have policy implications.

The High Unemployment Rate among the Young. In a typical household, the respondent will be an older person, who will be worried about the self-sufficiency and marriage prospects of the younger members of the household. So of course the young people are looking for work. If they are not working, it is because the system is failing them and so they are unemployed.

I believe each household will be very focused on jobs for young members of the family. I therefore think we can trust the data for unemployment among young people.

The problem is that young people need to acquire work habits and skills. The Department of Labor is promoting apprenticeships to bridge the work-habit and skills gap for young people. As I have said before, I think this is a good program.

Questionable Data on the Elderly. For those 55 years and over, however, the issue is not skills but health, fatigue and inertia. Layoffs become permanent because older workers lose their skills during a long period of unemployment.

Respondents to the survey may be more indulgent if grandpa or grandma is unemployed. He or she may have an ailment that prevents them going to work. The savings of the grandparents may be inadequate for a comfortable retirement, but they aren't up to answering advertisements.They may show up under the "long-term unemployed" or "discouraged workers" but most likely they are counted as just not being in the labor force.

So they don't show up as unemployed, but they have valuable knowledge and would take a job if one was offered. What I am thinking is that the unemployment data are understated in the oldest age group and that a program that would parallel apprenticeship for the oldest workers would be useful.

Two public-policy implications of this come to mind:
  • To avoid losing large numbers of older workers in a downturn, the Federal Government should subsidize a kurzarbeit program whereby workers are put on shorter weeks rather than some of them being laid off. These preserves worker skills for the uptick in business.
  • A pro-active program for matching up skills with employers would be useful, focusing on the special needs of 55+ workers. The National Council on Aging highlights a program of the Taub Foundation that targets this issue.
Gender Differences

It used to be, a year ago, that the unemployment rate was higher for men than women.That number has flipped, and women are slightly more likely to be unemployed - except for the youngest (16-17) and oldest (55+) age groups.

The best predictor of a low unemployment rate is having a spouse in the house. Both men and women with a spouse around have an average unemployment rate below 4 percent,

Chart 2. Household Survey Unemployment Data by Age Group and Gender
Table A-10. Selected unemployment indicators, seasonally adjusted
Characteristic No. unemployed ('000) Unemployment rates, Percent
Oct.
2013
Sept.
2014
Oct.
2014
Oct.
2013
June
2014
July
2014
Aug.
2014
Sept.
2014
Oct.
2014








MEN, 16 years and over 6,171 4,872 4,638 7.5 6.3 6.2 6.2 5.9 5.6
16 to 17 years 224 199 259 23.3 26.6 25.7 25.5 21.4 25.2
18 to 19 years 500 419 312 25.3 21.1 20.5 19.9 22.3 16.5
20 to 24 years 1,111 1,034 842 13.7 11.7 12.5 11.5 12.6 10.3
25 to 34 years 1,360 1,055 1,106 7.5 6.6 6.5 6.6 5.7 6.0
35 to 44 years 998 685 720 5.7 4.5 4.8 4.9 3.9 4.1
45 to 54 years 1,073 715 658 6.0 4.1 3.8 4.3 4.0 3.7
55 years and over 991 725 767 5.6 4.9 4.3 4.4 4.0 4.2

WOMEN, 16 years and over 4,969 4,390 4,358 6.9 5.9 6.2 6.1 6.0 5.9
16 to 17 years 247 196 199 24.2 20.5 20.6 22.0 20.3 19.2
18 to 19 years 288 322 322 16.4 17.5 17.1 15.6 17.3 17.1
20 to 24 years 798 751 812 10.7 9.1 9.8 9.6 10.2 10.7
25 to 34 years 1,066 1,047 1,020 6.9 6.5 6.6 7.2 6.6 6.4
35 to 44 years 859 725 719 5.8 4.9 4.8 4.7 4.9 4.8
45 to 54 years 932 686 701 5.7 4.3 4.6 4.4 4.3 4.4
55 years and over 787 620 595 5.0 4.1 4.6 4.7 3.9 3.7

Married men, spouse present 2,046 1,302 1,360 4.5 3.4 3.4 3.3 2.9 3.0
Married women, spouse present 1,679 1,325 1,298 4.7 3.8 4.0 3.7 3.7 3.6