Labor Market Grows Uglier Amid Darkening Economy

The unemployment news for older Americans just got gloomier. In January, the U.S. unemployment rate rose to 7.6 percent, a 16-year high. Of the 11.6 million people out of work last month, 1.5 million—12.7 percent—were age 55 and older.

The news is especially troublesome because of the challenges older workers face when looking for new work. For example, it takes them 25 weeks to land a job, compared with 18.7 weeks for younger workers.

Moreover, when older workers do find jobs, their earnings on average are likely to be 25 percent less than what they were paid in their previous job, says Richard Johnson, an economist at the Urban Institute. “This recession is bad for older people because they can no longer simply afford to retire when they lose their jobs like they did in the past. Now we have so many older people invested in the stock market through retirement plans, it’s really impossible for them to retire.”

As bad as January’s report was, many economists believe the worst is still to come. Ben Garber, an economist at Moody’s Analytics in New York, predicts that the jobless rate will rise to 8.7 percent by the end of this year and to 9 percent in the first quarter of 2010.

“We expect heavy layoffs throughout the first half of this year,” Garber says. “As the lending markets gain stability and [interest] rates come in just a bit, we’ll see some modest economic growth by the end of the year.” The emphasis is on the word “modest.” “We’re not going to be feeling warm and fuzzy for a few years,” he says.

The Urban Institute echoes that sentiment. Even if the recession were to end later this year, unemployment rates might not get as low as 2007’s 4.6 percent “for years to come,” it noted in a December report. The institute noted that in the previous two recessions (1980-82 and 1990-92) it took five years for the unemployment rate to drop back to prerecession levels.

That’s especially bad news for people who are out of work as they approach retirement age.

“Once displaced, older workers are less likely to be reemployed, have less time to adjust their retirement plans and are more likely to retire prematurely,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. “Given the contraction of the nation’s retirement income system and rising longevity, these adverse effects make displacement increasingly [difficult] for older workers.”

Older workers seeking information on jobs, training and money management issues can visit AARP’s new Real Relief website.

Carole Fleck is a senior editor at AARP Bulletin Today.