After the pandemic caused an enormous spike in older workers leaving the workforce prematurely, many economists predicted there would be a ‘great unretirement.’
But they appear to have been proven wrong. A model from the Federal Reserve Bank of St Louis shows there are still almost two million more retirees than predicted.
There are still almost two million more retirees than there should be, according to a model from the Federal Reserve Bank of St Louis, which suggests those are mostly people over 65.
And although that gap started to close earlier this year, the latest data indicates it is now actually widening again.
The number of retirees peaked at around 2.44 million in January and dropping to around 1.67 million in June. But the latest Fed data for September indicates surplus retirement is back up to around 1.98 million.
The actual share of the population that was retired roughly tracked the predicted share from January 2000 right the way through February 2020, when there was a divergence
Miguel Faria e Castro, an economic policy adviser at the St. Louis Fed and creator of the model, suggested that ongoing the failure of retirees to return to work could be contributing to the tight labor market and low unemployment rate.
Since the pandemic, the Federal Reserve embarked on a historic series of interest rate hikes in an attempt to control inflation an minimize spending across the economy.
But despite interest rates of 5.25 to 5.5 percent – the highest in more than 20 years – the labor market has remained strong. In September, the last month Fed retirement data was added the US Bureau of Labor Statistics reported the economy had added 336,000 jobs, nearly twice economists’ expectations.
Faria e Castro’s model uses labor conditions, demographic information and Social Security benefits payments information to calculate the amount of retirement that would be expected under ‘normal conditions’.
And the actual share of the population that was retired roughly tracked the predicted share from January 2000 right the way through February 2020, until the substantial divergence emerged.
Since the sudden gap emerged there has been widespread speculation about the coming unretirement. Investment management firm T. Rowe Price noted as much its ‘Unretiring’ report, published last month.
Having peaked at around 2.44 million in January and dropping to around 1.67 million in June, the latest Fed data for September indicates surplus retirement is back up to around 1.98 million
There are still almost two million more retirees than there should be, according to a model from the Federal Reserve Bank of St Louis
It found that some 20 percent of those who consider themselves retired are actually working full-time or part-time, and another 7 percent are actively seeking employment.
‘While the gap seemed to be closing earlier in the year, it seems to have widened slightly since then,’ Faria e Castro told Bloomberg.
And the Labor Force Participation Rate (LFPR) of those 65 and older, as calculated by the Bureau of Labor Statistics, similarly indicates participation is still well below pre-pandemic levels.
In October, participation was 23.7 percent. In January 2020 it had just reached a high of 26.0 percent. Although many regard entering retirement as a one-way process, others are actively seeking new work.