Pandemic Accelerates Retirements, Threatening Economic Growth
Labor force participation rate of Americans age 55+ is at its worst level since the rise of the coronavirus pandemic. Falling from 40.3% in February of 2020 to 38.3% this February—representing a loss of 1.45 million people from the labor force. Many of these Americans have chosen to permanently leave the workforce which could impair our economic growth.
The proportion of the working-age population not in the workforce due to retirement rose to 19.3% in the fourth quarter of 2020 from 18.5% a year earlier, just before the pandemic, according to government data. That is roughly 2.4 million workers who left the labor force due to retirement since the pandemic’s onset, more than double the number who did so in 2019.
Economic output depends on the number of workers and how productive each worker is. Thus, the decline in participation, if not reversed, could weigh on growth. For older workers who are out of work but choose not to retire, it can take longer, averaging 32.5 weeks, to find work than their younger counterparts, 27.2 weeks, according to AARP analysis.
The good news is that with a vaccine-driven reopening and fiscal stimulus expected to boost growth to its fastest this year since the 1980s, job prospects should improve for older workers who haven’t yet retired.
*SOURCE: WSJ, Federal Reserve Bank of Philadelphia.