The Age/Experience Unemployment Rate Premium is Shrinking

Date	16-24	25-34	35-44	45+
Mar-90	10.6	5.2	3.7	3.5
May-92	14.4	7.7	5.8	5.2
Dec-00	9.2	3.7	2.9	2.4
Dec-01	12.2	5.9	4.4	3.6
Mar-07	10.0	4.3	3.2	3.3
Oct-09	19.1	10.6	9.0	6.8
Sep-19	7.9	3.5	2.6	2.5
Apr-20	27.4	14.5	11.5	12.8
Dec-20	12.6	6.7	5.5	5.6
Feb-22	8.3	4.1	3.3	3.0

I’ve summarized the last 30+/- years of US labor market experience with just the peak unemployment rates of the business cycle, plus December, 2020 as a secondary indicator of the peak Covid/pandemic impact, since the actual peak numbers in April, 2020 were so extreme and short-lived.

Less experienced individuals have historically had higher unemployment rates in the US. Compared with the 45+ age group, the 35-44 age group has averaged 0.3% higher unemployment; 5.2% versus 4.9%, a relatively minor difference. The 25-34 year age group has averaged 6.6% unemployment, a substantial 1.7% higher rate. The job-seeking 16-24 year age group has averaged 13.2% unemployment, more than twice as high as the 25-34 year age group and more than 2.5 times the 45+ age group (8.3% extra).

The “extra” unemployment for 35-44 year olds versus the 45+ group has been zero for the last 15 years, versus a minor 0.5% premium historically. It appears that workers are reaching full employment value at an earlier age.

The “extra” unemployment for 25-34 year olds versus the 45+ group has been 1.0% for the last 15 years, a small reduction from the prior 1.5% premium.

The “extra” unemployment for 16-24 year olds at the peak of the business cycle versus the 45+ group averaged just 5.3% recently versus 7% historically.

The 2007-2009 recession showed a greater impact on modestly younger (25-44 year old) workers, with their unemployment rates increasing by 2.5% more than the 45+ group.

Despite the reduction in the inexperience penalty for youngest workers (16-24) in the last few years, they did experience much higher “extra” unemployment during both the 2007 and 2020 recessions.

Very young workers continue to be penalized for their inexperience, but other workers from ages 25+ seem to have relatively equal economic value today.

Note that the current unemployment rates for those aged 25+ already matches the average MINIMUM rates of the last 4 business cycles: 3-4%. The 8.3% unemployment rate for the 16-24 year age group is below the minimum in 1990, 2000 and 2007, and just above the 7.9% level of Sep, 2019.