Unemployment for Boomers (45-65): Highest Ever

One the greater tragedies of the Great Financial Meltdown  (2007-2009 edition) is not just that unemployment rose to such high levels.  (that was is bad).  It’s not just that the unemployment has stayed high and will take years to get return to full employmnent given the weak policy responses (that’s worse).  It’s not even that the unemployed workers are staying unemployed for unprecedented long periods – creating a public health hazard and personal disasters. (that’s unconscionably worse).

No, it’s even worse than all this.  It’s the tragedy of destroying valuable human capital and wasting what should be/ could the most productive years of many people’s lives.  And, in so doing, jeopardizing their retirement, which in turn has negative impacts on the next couple generations.

From Calculated Risk on Nearing Retirement and Unemployed or Underemployed:

One of the groups seriously impacted by the great recession is the “pre retirement” generation – currently the “Baby Boomers” – the workers between the ages of 45 and 64.

Pre-retirement Unemployment Rate Click on graph for larger image in new window.

This graph shows the unemployment rates for two groups: 45 to 54 (seasonally adjusted), and 55 to 64 (only NSA data is available).

The unemployment rate for these age groups hit an all time high during the great recession (highest since WWII).

Michael Winerip at the NY Times has a story about the plight of several “Boomers” who he has tracked for the last year: Time, It Turns Out, Isn’t on Their Side (ht Ann)

A YEAR ago, I wrote about a job fair at the Sheraton in Midtown Manhattan, where over 5,000 mainly white collar, middle-aged jobless men and women waited in the cold for more than two hours, hoping to find work. …

For that column, I interviewed two dozen boomers. Given recent reports from the federal government and Manpower, the employment agency, that the hiring outlook is beginning to improve, I thought it would be worthwhile to go back to those highly motivated people. …

The short answer is, of the 16 I interviewed again, 9 describe themselves as still struggling. Eight continue to be unemployed or are working part-time jobs that pay near minimum wage. Several were so concerned about bias, they did not want to give their ages. …

Of the 16, only one, Mr. Kramer, who was unemployed eight months before being hired in July as a closing manager at a Best Yet supermarket, has found a job that pays more than his old position. More typical of the seven who’ve found full-time work is Ben Brief, 60, a printing supervisor, who’d been jobless two months when I interviewed him on Sixth Avenue in the 20-degree weather. Mr. Brief was out of work nine more months, before finding a printing job that paid 20 percent less than his previous position. “I’m glad to be working, but people know they can pay you a lot less in this economy,” he said.Kind of hard to sing “Yeah, time time time is on my side …” when you are 60 and unemployed or underemployed

Money Multiplier has Collapsed

From Yves Smith & Naked Capitalism  :   Guest Post: The Fed Is Responsible for the Crash in the Money Multiplier … And the Failure of the Economy to Recover

Washington’s Blog.

Greg Mankiw noted in January 2009:

Econ prof Bill Seyfried of Rollins College emails me:

Here’s an interesting fact that you may not have seen yet. The M1 money multiplier just slipped below 1. So each $1 increase in reserves (monetary base) results in the money supply increasing by $0.95 (OK, so banks have substantially increased their holding of excess reserves while the M1 money supply hasn’t changed by much).

Since January 2009, the M1 Money Multiplier has crashed further, to .786 in the U.S. as of February 24, 2010:

(Click for full image; underlying data is here)

That means that – for every $1 increase in the monetary base – the money supply only increases by 79 cents.

Why is M1 crashing?

Because the banks continue to build up their excess reserves, instead of lending out money:

These excess reserves, of course, are deposited at the Fed:

Why are banks building up their excess reserves?

As the Fed notes:

The Federal Reserve Banks pay interest on required reserve balances–balances held at Reserve Banks to satisfy reserve requirements–and on excess balances–balances held in excess of required reserve balances and contractual clearing balances.

The New York Fed itself said in a July 2009 staff report that the excess reserves are almost entirely due to Fed policy:

Since September 2008, the quantity of reserves in the U.S. banking system has grown dramatically, as shown in Figure 1.1 Prior to the onset of the financial crisis, required reserves were about $40 billion and excess reserves were roughly $1.5 billion. Excess reserves spiked to around $9 billion in August 2007, but then quickly returned to pre-crisis levels and remained there until the middle of September 2008. Following the collapse of Lehman Brothers, however, total reserves began to grow rapidly, climbing above $900 billion by January 2009. As the figure shows, almost all of the increase was in excess reserves. While required reserves rose from $44 billion to $60 billion over this period, this change was dwarfed by the large and unprecedented rise in excess reserves.