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R e s e & ir d h t D e p a rfe iiie in ifc
December 10,1976
Jobless Adults
Unemployment increased again in
November, continuing the upward
movement that has accompanied
the summer and fall slowdown in
the business recovery. The overall
jobless rate rose over the month
from 7.9 percent to 8.1 percent of
the civilian labor force, with much
of the increase centered among
adult males, partly because of such
reasons as layoffs at auto plants mak
ing unsellable small cars.
This development focuses the spot
light on unemployment among ma
ture adults, an area of increasing
interest in recent years. Admittedly,
the jobless rate among men and
women over 25, which has averaged
about 5.7 percent since midyear, is
only about one-half the level of
young adults (aged 20-24) and less
than one-third the rate for teenag
ers. But the adult category deserves
special interest in itself, if for no
other reason than the fact that peo
ple over 25 account for 54 percent of
all the unemployed.
Different problems
One reason for considering adult
unemployment separately is the
need to distinguish it from the in
tractable problem of unemploy
ment among the young. Since mid
year, the jobless rate among 16-19
year-olds has averaged about 18.7
percent. However, teenagers do
grow up and become part of an
adult population with much lower
unemployment, so high teenaged
unemployment in some respects
can be regarded as a transitory
phenomenon for the individual. A
person's association with the weak
labor market faced by the young
ends when he or she acquires the
work skills associated with the adult
market.
Another aspect of the adultunemployment problem is the con
centration of labor-force growth
among groups with historically high
unemployment, primarily adult
women. Of course, the teenaged
labor force has also grown, although
at a slower pace than the total teen
aged population, because young
people now spend more time than
they formerly did in school, and thus
out of the labor force.
Standardized rate
According to the Brookings' Institu
tion's George Perry, if we "stand
ardize” the labor force by assuming
that its composition remains fixed
over time, the lowest overall rate
reached in the 1971-73 business
expansion—4.8 percent—would be
equivalent to the low of 4.0 percent
reached in the 1954-56 expansion.
This approach may be oversimpli
fied, however, in view of an impor
tant distinction between the two
groups of people who have ac
counted for the largest share of
labor-force growth. Teenagers may
simply not have time to acquire
necessary job skills before they stop
being teenagers, but the same gen
erally cannot be said for adult wom
en workers.
(continued on page 2)
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Opinions expressed in this newsletter do not
necessarily reflect the views of the management of the
Federal Reserve Bank of San Francisco, nor of the Board
of Governors of the Federal Reserve System.
The bulk of the adult female labor
force normally would have long
since acquired the minimum skills
necessary to finding a job. Adult
men and adult women could still
have a different average level of job
skills, but the result needn’t be more
unemployment for women but rath
er a difference in average wage
levels for the two sexes. Conse
quently, because of the workings of
natural market forces, both in skills
acquisition and in wage levels, we
cannot wholly trust any standardiz
ation based on this particular de
mographic division of the labor
force.
Consistent behavior
A different approach, comparing
the jobless rate for mature adults (25
and over) with the overall jobless
rate, reveals two different types of
behavior over time. The overall un
employment rate has trended up
ward over time, but the mature-
adult rate has behaved in a generally
consistent fashion in each business
cycle. The rate rose to about 6 per
cent in each of the four deepest
postwar recessions, and fell to about
2 percent in peak years. The matureadult rate thus is unique in that,
beyond a certain point, it does not
respond either to severe recession
ary pressures or to severe capacity
shortages. Younger workers ac
count for all the added unemploy
ment in deep recessions and for all
the added employment in strong
expansions. Reflecting the differ
ence in movement, the gap be
tween the overall rate and the 25and-over rate has risen from 0.5
percentage points at the peak of the
1950-53 expansion to 1.8 percentage
points at the peak of the 1971-73
expansion.
In other words, labor-market be
havior for people 25 and over has
changed little if at all in either cycli
cal expansions or cyclical contrac
tions. This suggests, as does Perry’s
analysis, that in comparing unem
ployment movements over time, we
must standardize by some device for
changes in labor-force participation
of 16-to-24 year olds. In effect, the
workers provided by this younger
age group are not good substitutes
for older workers in terms of skill
and perhaps also in terms of the
amount of wage differential allowed
by law. But the stable cyclical re
sponse of the 25-and-over rate
suggests—somewhat differently
from Perry's analysis—that we are
witnessing a significant substitution
between men and women workers.
Unemployment vs. growth
As a check, we can estimate unem
ployment rates in various categories
in accordance with Okun's Law—an
econometric rule-of-thumb which
relates unemployment-rate changes
negatively to the rate of growth of
GNP. (For example, unemployment
rises in a recession in response to
declining GNP.) In this exercise, we
estimate unemployment levels
compatible with the 3.5-percent
postwar trend rate of growth of real
GNP.
The overall unemployment rate
compatible with this trend is 5.3
percent, averaged over the entire
postwar period, and that rate de
creases by .42 percentage points for
each one-percent annual rise in the
GNP growth rate. But the average
jobless rate for mature adults con
sistent with the GNP growth trend is
only 3.8 percent, and that rate de
creases by .35 percentage points for
each one-percent annual rise in the
GNP growth rate. This lower em
ployment response— .35 against
.42— ref lects the tendency of the 25and-over rate to level off rather than
to keep rising in deep recessions.
But at this stage, a year and half after
the beginning of a cyclical expan
sion, the jobless rate for mature
adults remains close to the 6percent level reached at the bottom
of the recession—contrary to what
Okun's Law tells us. One partial
explanation might be the impact of
inflation on labor-force participa
tion rates. Many adult women today
are being forced into the labor mar
ket to supplement family incomes
that had been severely depleted by
the decline in real wages induced by
the recent inflation. This inflation
may thus have accentuated the
movement of unskilled adult wom
en into the labor force and onto the
jobless rolls, offsetting the decline in
the adult jobless rate expected on
the basis of a cyclical recovery in
GNP growth.
Larry Butler
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BANKING DATA—TWELFTH FEDERAL RESERVE DISTRICT
(Dollar amounts in millions)
Selected Assets and Liabilities
Large Commercial Banks
Loans (gross, adjusted) and investments*
Loans (gross, adjusted)—total
Security loans
Commercial and industrial
Real estate
Consumer instalment
U.S. Treasury securities
Other securities
Deposits (less cash items)—total*
Demand deposits (adjusted)
U.S. Government deposits
Time deposits—total*
States and political subdivisions
Savings deposits
Other time deposits!
Large negotiable CD's
Amount
Outstanding
11/24/76
90,822
69,073
1,516
22,600
21,200
11,679
8,752
12,997
89,427
25,354
290
62,038
4,741
28,131
26,160
9,923
Change
from
11/17/76
_
-
+
+
+
-
+
+
+
+
-
3%
185
53
43
34
39
113
98
346
694
39
164
11
202
2
122
Change from
year ago
Dollar
Percent
+ 3,958
+ 3770
+ 104
601
+ 1,576
+ 1,266
30
+ 218
+ 2,027
+ 1,594
114
+ 581
- 1,180
+ 7,306
- 3,987
- 6,052
Weekly Averages
Week ended
Week ended
of Daily Figures_________________________________________11/24/76__________ 11/17/76
Member Bank Reserve Position
Excess Reserves (+)/Deficiency (-)
Borrowings
Net free(+)/Net borrowed (-)
Federal Funds—Seven Large Banks
Interbank Federal fund transactions
Net purchases (+)/Net sales (-)
Transactions of U.S. security dealers
Net loans (+)/Net borrowings (-)
+
+
+
+
+
+
+
+
+
+
-
4.56
5.77
7.37
2.59
8.03
12.16
0.34
1.71
2.32
6.71
28.22
0.95
19.93
33.48
13.23
37.88
Comparable
year-ago period
3
0
3
+
+
20
0
20
+
643
+
719
+ 1,384
-
10
+
307
+
-
+
+
39
1
38
544
'“Includes items not shown separately. {Individuals, partnerships and corporations.
Editorial comments may be addressed to the editor (William Burke) or to the author. • • •
Information on this and other publications can be obtained by calling or writing the Public
Information Section, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120.
Phone (415) 544-2184.
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