Unemployment and an Aging Population

If you look at the unemployment by age graph I posted yesterday you'll see a trend. The younger you are the higher your unemployment rate. But, I wondered, was this what was really happening? Was it possible people were dropping out of the workforce? I looked at two age groups in particular: 45-54 and 55 and older and their respective populations and employment to population ratio.

The 45-54 graph paints a pretty obvious picture of what we might expect to see. After the recession the employment ratio drops significantly. Fewer people in this prime working group have jobs. The 55 and older is a little more tricky. They naturally have a much lower employment ratio since many are post retirement.

Still, it's interesting to see the aging demographics as the 45-54 population growth peaks in about late 2009 and that starts dropping a little. The 55 and older demographic is steadily growing. But looking at these two graphs doesn't tell you whether the unemployment rate is only dropping because people are dropping out of the workforce. To see that you'd want to compare the employment to population ratio with the unemployment rate.

Again it's expected that the employment to population ratio would take a dip in 2009 and the unemployment rate climb significantly. But we can see in late 2011 as the unemployment rate is dropping that the employment to population ratio is staying pretty steady. Let's zoom in...

Unemployment going gradually down and the employment to population rising a bit in December 2011 and January 2012. That would seem to dispel the idea of people dropping out of the labor force. In fact given the climb in the ratio it would seem to imply the opposite, that more people are getting back into the workforce.

Why don't the two follow each other in an obvious way? In October 2010 there's a significant drop in the employment to population ratio but the unemployment rate stays mostly flat. I'm guessing that's because a lot of people dropped out of the workforce here, gave up, stopped looking for jobs, etc. So the unemployment rate did not go up significantly (though did bump up a little).

None of these graphs will really be encouraging though until we can see an obvious month over month trend. Overall unemployment peaked for most age groups around late 2010. But it didn't start immediately getting better after that. Those 55 and older have fared significantly better than their younger colleagues but that doesn't mean age discrimination isn't still out there. Older works might be having a problem that they are part of a very large and growing population demographic so while they are more employable than younger people with better experience they also have to compete with many other folks their age who also have great experience. What do you think, do these graphs capture a slightly improving job market or is there more at play here?