Americans in their early 60s are also fairly close to record labor force participation. The sharp declines concern all people aged 65 and over. But – and this is where things get really weird – these declines are still smaller in percentage terms than those of the 55-and-over group as a whole. This strange oddity of data is the result of what are called compositional effects, caused by the changing age distribution within the age group, which I will discuss a little later. But first, let’s sidestep the odd quirk by looking at changes in the labor market for smaller age groups. adjusted labor market data. The unadjusted numbers come with large seasonal fluctuations and, especially when looking at narrow age groups such as 55-59, a fair amount of statistical noise from month to month. Still, there are ways to manage both, like comparing this summer’s three-month averages with those before the pandemic in 2019.
The labor force participation rate is the estimated number of Americans who are gainfully employed (not including active duty military) or seeking employment, divided by the non-institutionalized civilian working-age population. Another key measure, the employment-to-population ratio, is the number of people in paid employment divided by the population, also excluding active duty military and institutionalized people. Both are expressed as percentages, so why one is called a rate and the other a ratio is a mystery to me. After this table, I will simply refer to both as rates.
One thing that stands out here is the seemingly limited impact of Long Covid on the labor market. The lingering effects of Covid-19 are real and may afflict millions of Americans, but the fact that every age group under 60 but two has higher participation and employment rates than before the pandemic seems to indicate that Long Covid isn’t keeping a significant number of working-age Americans out of the workforce. As for the two age groups under 60 who have not regained or surpassed their summer 2019 participation and employment rates, those in their early 20s may stay longer at the university to catch up on pandemic gap years and other delays, or still struggle to recover from the many disruptions to the job market and society at large in 2020. For people in their late 30s, complications from Childcare could be a culprit, although oddly women in this age group have returned to pre-pandemic levels, unlike men.
For workers aged 60 and over, who in the decades before the pandemic had seen steady gains in labor force participation and employment, it makes sense that a disease that was far deadlier for older people have driven many out of the workforce – either because of fear of catching Covid-19 or battling complications from Long-Covid after catching it. The remarkable performance of stocks and other assets in 2020 and 2021 may also have led some affluent older workers to retire earlier than expected. But again, members of the 60-64 age group only left briefly. Their labor force participation rate hit an all-time high in March 2020, when low response rates amid the shutdowns may have skewed the data, and edged closer to that last November. (“All times” for these figures only go back to June 1976, but statistics available since 1948 for the broader age group of 55-64 indicate that recent rates are also highest during this time. period.)
Participation of people aged 60 to 64 was down this summer compared to the summer of 2019, but this could be evidence of a change in seasonal hiring patterns rather than a sustained decline in participation. labor market. Teen labor force participation plummeted in the 2000s, leading traditional teenage employers such as McDonald’s to recruit seniors for summer jobs. Today, hordes of 16- and 17-year-olds are entering the workforce, reducing the need for such efforts.
Those 65 and older have actually seen a sharp drop in labor force participation after decades of gains. But those over 65 made up only 6.6% of the working population in August, compared to 16.4% for those aged 55 to 64. Their 1.1 percentage point drop in labor force participation since the summer of 2019 equates to 626,835 missing applicants. workers – not nothing, but also not that huge in a workforce of almost 165 million.
The decline in labor market participation for the broad category of 55 and over is 1.7 percentage points, whether measured in seasonally adjusted data for February 2020 or in unadjusted comparisons for summer 2019 in the summer of 2022, as I did with the other age groups. . How can that be more important than the drop for people over 65, let alone those in their late 50s and early 60s? Well, the youngest baby boomers will turn 58 this year, which means the younger part of the 55+ group is now replenished with the smaller members of Gen X.
For this reason, the average age of Americans in the 55+ category has increased even during the ravages of Covid-19 and will continue to do so. (1) Meanwhile, labor force participation tends to peak around age 40 and decline as age beyond. Thus, from year to year, the activity rate of those aged 55 and over will fall even if the rates for each year of age within the group remain the same. The reverse happened when baby boomers started entering the age group two decades ago, as will also be the case for the over-75 age group they started. to join last year.
The aging of baby boomers and the American population in general is real and will have many economic consequences, but the apparent mass exodus of workers aged 55 and over during the pandemic is something of a statistical mirage. In other words, many older Americans left the workforce, but the irreversible process of aging was as much to blame as the potentially reversible consequences of the pandemic. Those looking to attract more people to the job market should probably focus on addressing the issues that are keeping potential workers away in their early 20s and late 30s rather than worrying about older people.
Again, there’s another compositional effect at work in these statistics that I haven’t discussed. While women’s labor force participation rates increased from the 1950s to the 1990s, those of men fell. So while the current labor force participation rate for all Americans in their late 50s and early 60s is near an all-time high, for men it is well below rates before the mid 1970s.
The conundrum of why labor force participation fell so much among American men of all ages was a major topic of economic discussion in the 2010s that is likely to see a revival. For people in their late 50s and early 60s, the drop wasn’t all bad news, as generous early retirement packages certainly helped in part. These are less common than they were before, while bringing the participation of men aged 55 to 64 back into the labor force, for example, to the August 1970 rate of 82.6% would add 2 million potential workers to the US labor market. Bringing the participation rate of so-called prime-age men (25-54) back to 1970 levels would add another 4.5 million. Reversing the changes that occurred half a century ago is certainly much more difficult than reversing those of the past two years. But this may be the next frontier.
More other writers at Bloomberg Opinion:
How the United States can make the apprenticeship model work: Robert Lerman
Powell can’t count on a labor market miracle: Jonathan Levin
Young people won’t find meaning in life at work: Allison Schrager
(1) It fell in Census Bureau data from mid-2019 to April 2020, as the 2020 census found there were fewer Americans 70 and older than the bureau had previously estimated , But this is another story.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. Former editorial director of Harvard Business Review, he has written for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market”.
More stories like this are available at bloomberg.com/opinion