Just a Recession, Like All the Previous Ones

Includes: DIA, SPY
by: Zubin Jelveh

In this week's Off the Charts column, NYT's Floyd Norris describes how the young and old are having a very different experience so far in this one-year-old recession:

There are now more jobs than there were a year ago for every group over 55 years of age -- and fewer jobs for every group under 55.

What accounts for this?

The difference reflects the fact many more older people want jobs. The labor force -- defined as those who have jobs or are looking for them -- has grown rapidly among those who have reached the ages at which many traditionally retire. Now, with their 401(k) plan assets down sharply in value and their homes also worth less than they had been, many people are putting off retirement or seeking to return to work.

But I think Norris is reading a little too deeply into the numbers. Another way to examine these trends is to look at the employment-population ratio, which is particularly important given that whole Graying of America thing.

The following chart plots the change in the E-P ratio between November '07 and '08 for the same age groups Norris uses in his chart. A positive reading means that job growth is outpacing population growth while a negative number means that employment is falling behind.


This tells pretty much the same story as Norris: younger workers are suffering while older ones are staying above water. The only difference is that the 55 to 64 age group is down, not up.

But let's see what happened in recessions past. The following chart also throws in year-over-year E-P ratio changes for November '90 and '01. (And I will admit that I'm sticking with Novembers out of laziness.)


The patterns look pretty similar, so the next logical question: Does this only happen during recessions?

This chart also adds y-o-y changes for '87, '98, and '05 -- all of which were expansion years and happened three years before downturns:


So, it looks like the discrepancy in how different age groups are being affected by the current recession is likely more a function of what part of the business cycle we're passing through than anything unique to our era.