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2012 Leroy O. Stone. All rights reserved.


Unpack the Unemployment Rate to get a Better Picture of Economic Hardship Among Older Workers, by Leroy O. Stone, Département de démographie, Université de Montréal

Unpack the unemployment rate to get the "real" story about the labor market environment in which older workers are operating. Thanks to the public use microdata file of the Current Population Survey (CPS), provided to researchers by the Bureau of Labor Statistics (BLS), some significant unpacking is possible. The first two charts below show our proxy layoff rate and our proxy hirings hiring rate for men and women aged 55 to 64 averaged over the last three months for which there are available data —February to May 2012.

gross flow from unemployment to employment May 2012

gross flow for employed to unemployed May 2012

Source:  Public-use microdata files of the BLS Current Population Survey

How to interpret these charts?  Consider the next chart.  It compares the proxy hiring rate among persons aged 55 to 64  between February-May 2008 and the same period in 2012. The 2008 figure is at 100% (using a 3D design for the chart produces a slight visual distortion  -- the plotted number is close to the closest left-hand corner at the top of each column). 

gross flow from unemployed to employed 08 to 12

This means that at that time no additional unemployed persons had to be moved into employment to bring the unemployment rate (at the end of a given month) down to the benchmark unemployment rate of 3%. Now look at the rate for February-May 2012. It is close to 20%. Thus, the proxy hiring rate had fallen some 80 percentage points below its potential as of roughly May 2012.

Let us know look at the next chart. It deals with the proxy layoff rate, and shows values not far apart between 2008 and 2012.

groiss flow from employed to unemplyed 08 to 12

Here is the interpretation. In 2008 employers had not used 95% of the amount of dismissal of workers that would be required to bring the unemployment rate up to 25% — a Third World level. The column for February-May 2012 indicates that employers had a slightly higher propensity (compared to 2008) to move toward the potential "panic level" of dismissing workers but the rate is basically similar when compared to the benchmark 100% level. In May 2012 they were still more than 90 percentage points below the potential "panic rate" of layoffs.

We can think of the hiring's rate as being a bullish force in the older population's labor market, and of the employer layoff rate as being a bearish force. These charts are telling us that the major change that we have seen is a enormous weakening of the "bull" force accompanied by a slight strengthening of the "bear" force.

You can get some valuable additional details concerning the changing economic environment for older workers from our portrait of the features of the trends since 2008, using charts such as those above. The charts provide details for the 65-and-over population, for example, and breaks down the situation in 2012 to show additional differences between older man and older women at that time. Among these differences is one about the rate of moving from (a) either unemployment or being "Discouraged" outside the labor force to (b) "other not in the labour force". We can think of this as the proxy "throwing-in-the-towel” rate. These additional charts are in a nine-page PDF file.

Accompanying the charts is more interpretive text, as well as commentary concerning the implications of the patterns. Thus as we said above, a significant unpacking of the unemployment rate in the older population — one that can lead you to far superior insight into the demand side of the labor market for older workers.

Chapter 4 of Key demographics, entitled "The Fall in Confidence Among the Pre-Retired", provides one more chart for the trend between 2008 and 2010, embedding it in a discussion about the fall of confidence concerning retirement among older workers and implications of that fall for the priority that the older population will be placing upon pursuing comprehensive retirement risk management. I ask you to purchase the book at Springer (or your favorite bookstore), or purchase chapter 4 only as an electronic download (look for the "eBook" link at the Springer page) and then send me an e-mail message ( ) with some evidence of your purchase. You will then receive your free copy of the PDF file mentioned above.

Thanks in advance. P.S. Will you be lecturing or doing a term paper or thesis in this area starting in the Fall term? Then take note that there is an 18-item bibliography in the PDF file, and 11 of these are references to 2012 publications. GREAT stuff to help you to keep your lecture/paper “right up to date”!