Retirees and near-term retirees have taken a financial hit since the start of the year. From the end of 2021 to the present, equity index funds are down 16% and bond index funds are down almost 13%. In addition, traditional defined benefit pension plans - especially those that do not have cost of living provisions - are worth less as inflation rises. While housing prices have risen, older workers and retirees have seen their net wealth position decline.
One way that older workers can weather stock and bond market turbulence is by remaining in the labor force. Overall, the labor market has remained robust even as prices have risen and asset values have declined. The U.S. unemployment rate in April was 3.6% and job openings far exceed the number of unemployed workers looking for work. However, real wages have not kept up with inflation and are now 1.5% lower than in December 2021.
So, how has employment for different groups of workers changed over the past two years, and have older workers behaved differently than younger workers? The figure below depicts the employment ratios for women and men by age groups since February 2020, the peak month of the previous business-cycle. A group's employment ratio is simply the number of employed workers in the group as a percentage of the group's population. The age groups include young workers ages 16 to 24, prime age workers ages 25-54, two sets of near-term retirees ages 55-59 and 60-64, and the population at or above the traditional retirement age of 65. As the series show, employment has rebounded for each group since the significant declines between February and April 2020. Across all groups, prime age men have the highest employment ratios, followed by men 55-59, prime age women, and then women 55-59.
The sharpest initial employment decline was among young workers 16 to 24 years of age, where the employment ratio for women fell 35% and for men fell 29% between February 2020 and April 2020. Workers 65 and above had the second largest percentage decline over these months with the women's employment ratio falling 22% and the men's ratio falling 18%. Women's employment ratios fell more than men's and older workers, ages 55-64, fared better or about the same as prime age workers during this two-month period.
The next figure illustrates how employment ratios have rebounded relative the pre-pandemic highs. Among prime-age workers, employment ratios are just slightly below their pre-pandemic levels. Women's employment has rebounded more than men's among the 16 to 24 and 55 to 59 age groups. Employment ratios in the 55 to 59 and 60-64 age groups are, for the most part, above pre-pandemic ratios. However, among the traditional retirement-age population employment ratios have declined since February 2020.
The evidence for retirement-aged workers indicates that they had some of the highest employment declines during the Covid-19-induced recession. Their employment rebound also remains below the pre-pandemic level, suggesting that many retired and have permanently left the labor force.
This evidence also indicates that older workers 55-64 were able to retain their employment at or above the rates among prime-age workers at the outset of the recession and have also seen an employment rebound that rivals or exceeds the rebound of prime-age workers. For older workers, remaining in the labor force, though shortening the length of retirement, provides insurance against the declines in retirement wealth and market uncertainty.
One way that older workers can weather stock and bond market turbulence is by remaining in the labor force. Overall, the labor market has remained robust even as prices have risen and asset values have declined. The U.S. unemployment rate in April was 3.6% and job openings far exceed the number of unemployed workers looking for work. However, real wages have not kept up with inflation and are now 1.5% lower than in December 2021.
So, how has employment for different groups of workers changed over the past two years, and have older workers behaved differently than younger workers? The figure below depicts the employment ratios for women and men by age groups since February 2020, the peak month of the previous business-cycle. A group's employment ratio is simply the number of employed workers in the group as a percentage of the group's population. The age groups include young workers ages 16 to 24, prime age workers ages 25-54, two sets of near-term retirees ages 55-59 and 60-64, and the population at or above the traditional retirement age of 65. As the series show, employment has rebounded for each group since the significant declines between February and April 2020. Across all groups, prime age men have the highest employment ratios, followed by men 55-59, prime age women, and then women 55-59.
The sharpest initial employment decline was among young workers 16 to 24 years of age, where the employment ratio for women fell 35% and for men fell 29% between February 2020 and April 2020. Workers 65 and above had the second largest percentage decline over these months with the women's employment ratio falling 22% and the men's ratio falling 18%. Women's employment ratios fell more than men's and older workers, ages 55-64, fared better or about the same as prime age workers during this two-month period.
The next figure illustrates how employment ratios have rebounded relative the pre-pandemic highs. Among prime-age workers, employment ratios are just slightly below their pre-pandemic levels. Women's employment has rebounded more than men's among the 16 to 24 and 55 to 59 age groups. Employment ratios in the 55 to 59 and 60-64 age groups are, for the most part, above pre-pandemic ratios. However, among the traditional retirement-age population employment ratios have declined since February 2020.
The evidence for retirement-aged workers indicates that they had some of the highest employment declines during the Covid-19-induced recession. Their employment rebound also remains below the pre-pandemic level, suggesting that many retired and have permanently left the labor force.
This evidence also indicates that older workers 55-64 were able to retain their employment at or above the rates among prime-age workers at the outset of the recession and have also seen an employment rebound that rivals or exceeds the rebound of prime-age workers. For older workers, remaining in the labor force, though shortening the length of retirement, provides insurance against the declines in retirement wealth and market uncertainty.