Staying power
The U.S. job market has staged a remarkable rebound since the start of the pandemic almost three years ago. The latest government data, released on Friday, showed that 2022 was the second-best year on record in terms of raw job growth, behind only 2021.
Yet the number of people available to work remains substantially smaller as a share of the population than before the pandemic, and some key economic policymakers seem to have all but given up hope that it will grow much in the years ahead. The country has a “structural labor shortage” that is unlikely to be resolved anytime soon, Jerome Powell, the Federal Reserve chair, said last month.
If Powell and his colleagues are right, their prediction has big implications for the U.S. economy. A smaller pool of workers makes it harder to rein in inflation because companies have to raise pay — and, most likely, prices — as they compete for workers. And beyond the inflation debate, an economy in which fewer people are working is one that cannot grow as quickly as in the past.
Are they right? Many economists offered similar warnings of a labor shortage after the last recession ended in 2009. Instead, the work force staged an impressive rebound.
In today’s newsletter, I want to talk about one reason the workers defied expectations a decade ago but are unlikely to now: baby boomers.
Working late
The share of adults who were working or looking for jobs plummeted during the brutal recession and anemic recovery that followed the 2008 financial crisis. Many forecasters expected it to keep falling as the enormous baby boom generation moved toward retirement.
Many boomers put off retiring, however. In 2019, just before the pandemic, 57 percent of Americans in their early 60s were still working, compared with 46 percent of that age group two decades earlier. Improved health and shifting industry patterns — more jobs in offices, fewer in factories — played a role. So did sheer financial necessity: The housing bust and stock market collapse left many people without enough savings for retirement.
Instead of dropping, the share of workers and job seekers leveled off starting in about 2014, then began to rise slowly toward the end of the decade. That shift partly reflected the strengthening economic recovery, which drew workers off the sidelines as wages rose and opportunities improved. But the importance of the baby boomers is hard to overstate: Virtually all of the growth in the labor force between the end of the Great Recession and the start of the pandemic a decade later came from workers 55 and older.
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