Three million Americans retired during the first six months of the coronavirus pandemic in the US, and that could make returning to full employment in the US more challenging.
The US labor market is like a complicated, sophisticated house party: It’s not just one-in, one-out at the main entrance. People are switching rooms, popping in the side-door, falling out the windows and sneaking in again through the back. Americans have been quitting at the highest rate in decades as the pandemic recession spurred them reevaluate what they want from their employers, even as record-high job openings entice them with new opportunities.
If more workers are demonstrating the leverage they now hold by quitting, many are also showing their independence from the labor market by retiring. During the pandemic, the share of Americans in retirement jumped from about 18.5% to 19.5%:
Economists who study the labor market say that the rise in Americans hanging up their spurs is likely something of a one-off: People who would have retired anyway in the next few years seeing the economy shut down and saying, alright, I’m leaving the workforce early. Some of them may have been delaying retirement already to benefit from the hot economy before the Covid crisis.
The aging US population, with an increasing share of the population reliant on savings and pensions, matters for everything from the US government’s fiscal position and the productivity in the economy overall, to the future of the healthcare industry. But in the medium term, though, it may screw up calculations about managing the US macroeconomy.
Policymakers at the US Treasury department and the Federal Reserve are aiming to get the US back to work at pre-pandemic rates. Right now, economists estimate the US is about 7 million jobs in the hole. But those assumptions depend on the idea that the share of the population that wants to work will return to its pre-pandemic level. If some of those three million retirees aren’t coming back to the office, policymakers may be overshooting with employment incentives—and that could lead to rising wages and prices.
Still, there are other indicators that suggest there is plenty of slack still left in the labor market, particularly some 3.8 million Americans who have been unemployed for six months or more. Investors and analysts will be watching the June jobs report, released July 2, for the latest update on US hiring. If it comes in lower than expected, it may be because some of the most experienced workers have called time and employers are struggling to easily replace them.
But in the long term, it may be time to grapple with the fact that millions of Americans won’t be coming back to work at all.