The 'Twin Peaks' Of Unemployment

Unemployment rates off their recent highs but still a matter of concern. Yesterday my friend Francois Gadenne, the Chairman and Executive Director of the Retirement Income Industry Association (RIIA), sent me some interesting commentary on historical unemployment rates by age cohorts. His email prompted me to investigate four Bureau of labour Statistics (BLS) unemployment rate series, which date from 1948 to the present. These series essentially provide us a crude demographic breakdown of unemployment. The categories are Age 20 and over, Age 20-24, Age 25-54, Age 55 and over.

Here is an overlay of the four series, with special focus on the three subcomponents.


Click for a larger image

Unemployment among the youngest cohort has always been the highest. The other two cohorts had similar unemployment levels until the late 1960s, when the Age 55 and over group took the coveted position of the lowest unemployment rate.

The Twin Peaks


Those of us who follow long-term economic trends understand the twin peaks of unemployment. The first associated with the double-dip recession in the early 1980s and the second with the Great Recession of 2007-2009. What’s particularly interesting is the behaviour of the three cohorts during these periods. As the adjacent table illustrates, these are fraternal twin peaks, not identical. The 1980s event was worse (9.8% versus 9.3% for the combined cohorts), although the successively lower unemployment peaks in the intervening years probably lowered the threshold of pain and thus increased the sense of unemployment pain going into the Great Recession.

Of particular interest in the statistics is that the Age 25-54 cohort had the same percentage rate at the twin peaks. The youngest cohort saw a 4.3% increase from peak-to-peak unemployment. But most striking of all is significantly higher rate of unemployment for the Age 55 and over cohort — a 25.9% increase from the April 1983 peak to the August 2010 peak.

Thanks, Francois, for bringing this topic to my attention. Incidentally, registration is now open for the 2012 RIIA Spring Conference in Chicago (March 19-20), and I’m delighted to have the privilege of a spot on the program. I look forward to seeing some of you there.

Note: Here are links to the BLS data series at the FRED repository: Age 20 and over is series LNS14000024, Age 20-24 is LNS14000036, Age 25-54 is LNS14000060, Age 55 is LNS14024230.

Here is a link to the even broader civilian unemployment rate, UNRATE, which peaked in November and December 1982 at 10.8% and in October 2009 at 10.0%.

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