Why the Middle-Aged Are Missing Out on New Jobs

More bad news for boomers: Most new jobs are going to older and younger workers.

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Jobs are back. Just not for everybody.

Like many other things in the stutter-step economic recovery, the job market is finally recovering, but progress is uneven and some people are being left out. The latest jobs report, for example, shows that the economy created 216,000 jobs in March, for a total of about 1.9 million new jobs since employment levels bottomed out at the end of 2009. That's a healthy pace of job growth that will help bring down the uncomfortably high unemployment rate, and, with luck, cement the recovery.

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But digging into the numbers reveals some of the unusual ways that work and retirement may be permanently changing for millions of Americans. Most of the new jobs created since the end of 2009, for one thing, are going to workers under the age of 34, or over the age of 55. Employment levels for middle-aged workers, meanwhile, are stagnant or still falling. Here's a breakdown:

Age group Job gains last 15 months Unemployment rate
All adults 16 and over 1.9 million 8.8%
16 – 24 490,000 17.6%
25 – 34 709,000 9.1%
35 – 44 -143,000 7.2%
45 – 54 -454,000 7.1%
55 and over 1.3 million 3.1%

(Note: The broken-down job numbers don't completely add up to the total due to seasonal adjustments and other factors.)

Job gains for workers under 35—about 1.2 million in total—seem to be healthy and normal for this point in a recovery. That's obviously good news, since recent college grads will have an easier time finding jobs, adult kids will finally wave goodbye to their parents and move out on their own, and young Americans will form more new households, which will help boost spending and perhaps even revive the moribund housing market down the road. But other trends are surprising and even troublesome. Here are four important things that seem to be changing:

More working seniors. Workers over 55 are snagging the most new jobs, which says a lot about the state of retirement planning in America. Numerous surveys show that perhaps half of all Americans heading toward their retirement years lack enough savings to maintain their current standard of living as they age. The sharp drop in home values has hammered away at the household wealth of many retirement-age people. Many others lost a bundle when the stock market fell in 2008 and 2009—and bailed out just in time to miss the bull market that followed. Add to that fears of cutbacks in Social Security and Medicare, due to the skyrocketing national debt. The golden years, for many, aren't shimmery at all.

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Many seniors say they plan to postpone retirement or work indefinitely, and the data shows they're doing just that. For the last decade, the overall labor-force participation rate—the percentage of the population that wants to work—has been gradually shrinking. But for workers 55 and over it's been going straight up. At the beginning of 2001, for instance, about 33 percent of seniors counted themselves as part of the labor force. Right before the recession started, in 2007, it was about 39 percent. The participation rate dropped sharply for all other age groups during the recession, as people gave up looking for work, went back to school, or decided to stay home for awhile to help with the kids. But for seniors it inched up, and is now at 40 percent—about 7 points higher than a decade ago. On one hand, it's good news that older workers are able to keep a paycheck coming, and build (or rebuild) their nest eggs—and that employers are willing to hire them. But they may also be taking jobs that would go to younger workers. And rising later-life employment is probably a sign of economic stress that could last awhile.

A major midlife job crisis. The overall job market is clearly healing, but middle-aged workers aren't part of the revival. Workers between the ages of 45 and 54 are still losing jobs on net, with a decline of about 364,000 jobs in this age group so far this year. That seems remarkable—and worrisome—given that these are people in their prime earning years, and they also ought to be at peak levels of expertise in their fields or careers. Yet they're not yet participating in the jobs recovery, perhaps because their pay requirements are too high in an economy where employers still aren't willing to bring back the most expensive workers. Many are most likely middle managers whose ranks were severely thinned during the recession, or construction and manufacturing workers who still can't find work, and may never be able to in their current fields.

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For the next youngest age group, the news is slightly better. Workers between 35 and 44 have picked up 158,000 jobs so far this year, but that's still weak growth, and overall this group is still down 143,000 jobs since the end of 2009, when the overall job market started to turn up. The weak job prospects for workers between 35 and 54 has major implications for the whole nation, because in general these are the workers supporting middle-class families (or trying to). Their spending drives the economy, and growth will be weak if middle-aged workers continue to struggle, or worse, drop out of the labor force in bigger-than-usual numbers.

More female breadwinners. Women have played an increasingly important role in the economy over the last 50 years, and that trend accelerated during the recession. Men dropped out of the labor force at a faster rate than women during the recession, and women also seem to be regaining jobs at a faster pace than men. Women are slightly better educated than men on average, and they also tend to work in fields like healthcare and education, which are more stable than male-dominated fields like construction and manufacturing. One likely outcome of all the turbulence in the job market is that women will be the breadwinners in more middle-class families headed by middle-aged parents.

[See how tough times are helping women get ahead.]

A shrinking labor force. It's typical for the number of people working or looking for work—the standard definition of the labor force—to shrink during a recession. Some people figure they won't find a job no matter what, so they do something else until the economy improves, when they start looking for work again. But that's another pattern that may have changed. "Despite our expectations for an improving labor market, the participation rate may not rebound," economist Drew Matus of investment bank UBS wrote in a recent report. Before the recession, about 66 percent of all adults had a job or were looking for one. That's fallen to 64.2 percent, where Matus thinks it may stay. That's partly due to "discouraged" workers who can't find work and may remain on the sidelines for good, but also due to the gradual aging of the workforce, net wealth that's higher than it was in prior generations (despite the ravages of the last few years), and other demographic factors.

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If the U.S. workforce remains smaller than expected, that means it would take fewer job gains to bring unemployment down. The unemployment rate—perhaps the single most-watched economic indicator—would fall faster than expected, which would be interpreted as an accelerating recovery. But fewer people working also means less overall economic activity, and probably slower growth. So even the good news may be tainted. But it's better than no good news at all.

Twitter: @rickjnewman

Corrected on 4/6/2011: A previous version of this article misstated the number of jobs lost so far this year for workers between 45 and 54. The correct number is 364,000.