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Long-run Trends

 

Long-run trends

Employment/Population Ratios

Employment to Population ratio is the proportion of an age group that is employed. For example, 46 percent of females ages 15 to 24 were employed in 2013.

Why it matters:

It points to the economy‘s long-term ability to create jobs for a growing population

Exhibit 5-1: What proportion of the female working-age population is employed?

Employment to Population Ratio Women.png

A measure of the number of jobholders relative to the changes in the size of the population

Source: OECD database, Equity Communications

Exhibit 5-2: What proportion of the male working-age population is employed?

Employment to Population Ratio Men.png

A measure of the number of jobholders relative to the changes in the size of the population

Source: OECD database, Equity Communications


Unemployment Rate

The unemployment rate represents unemployed persons as a percentage of the population. For example, the unemployment rate for men ages 25 to 34 was 7.6 percent in 2013.

Why it matters

It shows general health of labor markets. A rise in the unemployment rate means that more people are looking for jobs and not finding them. A reduction in the unemployment rate means more people are looking for jobs and finding them.

Exhibit 5-3: Two recessions in the first decade of this century have fractured the labor market for women

Unemployment rate for women.png

Source: OECD Database, Equity Communications

“Fractured labor market disrupts career ambitions of emerging adults. The bottom-line is that each succeeding generation of young people is now poised to take longer to stabilize work lives than the generation before it. Thirty is the new twenty-five”

Exhibit 5-4: Two recessions in the first decade of this century have fractured the labor market for men

Unemployment rate for men.png

Source: OECD Database, Equity Communications

Comments on long-run trends in the national employment situation

Normally it should be a good thing that more high school graduates are choosing to delay entry into the main labor market and instead opting for post-secondary education. However, the economy is not creating enough jobs for the ever-increasing population of college graduates.

It really is a problem of mismatch. The 21st economy demands more degrees weighted towards math, technology and the sciences. However, many high school graduates are still opting for over-saturated and less rigorous degrees.

“The most important trend to come out of the last decade is the rapid graying of the labor force”

Effects of labor market conditions that young adults have experienced over the last decade will likely not be short term. Economists have found negative long-term socio-economic and personal consequences for individuals who enter the labor market during bad economic times.

Graying of the labor force

However, the most important trend to come out of the last decade is graying of the labor force.

The younger boomer cohort of men and women born between 1955 and 1964 and the older cohort of generation X men and women born between 1965 and 1970 appear to have been better insulated from the periodic economic disruptions of the last twenty years.

For instance, a college-educated man who turned 30 in 1993 was in a good position to reap the economic benefits of the dot-com boom. At age 38 in 2001, he escaped fallout of the dot-com bust, which mainly affected younger men. In the immediate aftermath of the dot-com bust, the next six years of the housing bubble were great for men who were in the prime of their earning potential. By the onset of the Global Financial Crisis and subsequent Great Recession, at age 46, he was better protected from the fallout of the economic crisis.

Indeed, there are cohorts who reaped the best of the last twenty years while also escaping the worst. Moreover, these lucky cohorts now hold the prime managerial jobs of today.

But the advantages do not stop there. Older workers are realizing that they do not have to slow down career progression once they reach the fifties. For instance, the proportion of employed women in the 54 to 65 age group has improved from 45 percent in 1993 to 56 percent in 2013. Similarly, the proportion of employed women in the 65 plus age group has improved from 8 percent in 1993 to 14 percent in 2013.

In other words, many older women of the boomer generation are opting to stay very active in the labor force at a time when they were previously expected to be in the twilight of their careers. The implications are seismic and we will expand on these in the concluding section of this report.

“Falling Employment to Population ratio for younger adults has long-term drag on consumer spending”

Falling Employment to Population ratio for younger adults has long-term drag on consumer spending

The dismal labor market situation for emerging adults has consequences.

A growing number of parents and grandparents are being asked to provide long-term economic support for struggling children and grandchildren. For instance, more grandchildren are moving in with grandparents while their parents struggle to navigate the job market.

Young people struggling economically also delay spending on the “heavy-hitter” goods that traditionally signify coming of age – weddings, cars, and independent housing. Spending on these heavy hitter goods triggers spending on other complementary goods like new furniture and even baby food.

Similarly, parents and grandparents who provide economic support for struggling young adults are forced to tighten up spending as they divert funds to these struggling adult children.

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