NewsWire: 5/20/22
- Many older Americans who retired during the pandemic are now returning to the workforce. The reasons for “unretiring” vary, but more flexible jobs and diminished Covid-19 concerns are often a factor. (The Washington Post)
- NH: Much ink has been spilled over America's persistently low LFP. But in recent months, the LFP rate has nudged higher. And a new analysis by Indeed economist Nick Bunker argues this is due to increasing rates of unretirement.
- In March 2022, the unretirement rate--the percentage of people who were retired a year ago but are now employed--hit 3.2%. That is a significant rise from June 2020, when the rate was only 2.1%. And it's roughly on par with pre-pandemic levels: The average reading between 2017-2019 was roughly 3.0%. The Washington Post estimates that about 1.5M retirees have re-entered the workforce within the last year.
- How is the unretirement rate calculated? Researchers use anonymous ID numbers from the Census Bureau's Current Population Survey (CPS). An unretired person is anyone who responded they were "retired," then a year later responded they were "employed." The researchers simply "divide the number of people who moved from retirement into work…by the number of retired people in the first period." A 3-month average is then applied.
- There are several theories on why the unretirement rate has rebounded. Ebbing Covid-19 hospitalizations could be persuading some older people that it's safe to re-enter the workforce. Others may want a steady cash flow amid high inflation and the threat of recession. And some may have retired initially due to “discouragement” but are now taking advantage of the hot labor market.
- This rebound in unretirement is not unprecedented. After the GFC, the unretirement rate similarly nosedived and then increased as the labor market tightened.
- Of course, the number of people who have retired early during the pandemic is still elevated. While the retired population has fallen from its peak of roughly 52M to 51M, there are about 500K retired people above the January 2019-February 2020 trend.
- A recent analysis by the Kansas City Fed estimates that in March 2022, LFP remained about 2M workers below pre-pandemic levels. That means about 25% of those missing individuals can still be explained by early retirements. I suspect the other 1.5M missing workers can mainly be explained by Long Covid, increased substance abuse, and a general decrease in desire to work. (See “Is More Substance Abuse Pulling Down LFP?” and “The Impact of Long Covid Keeps Growing.”)
- So what will happen to the unretirement rate going forward? It depends on how hot the labor market stays. If there continues to be demand for workers, the unretirement rate will probably remain elevated. But if we are hit with a recession and growing unemployment, the rate will most likely fall.
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