LONDON - In another potential feedback loop from falling stocks to the real economy, some economists now fear the risk of delayed retirement on the long-subdued U.S. unemployment rate.

One of the many reasons cited for the persistently low U.S. jobless rate in recent years has been the peaking wave of Americans reaching retirement age and leaving the workforce. Some may have left early during the pandemic, and others may have been encouraged to go by savings pots flush from years of booming stock prices.

But that decision has never affected more people than it will this year.

According to the Washington-based non-profit Alliance for Lifetime Income, a record 4.18 million U.S. workers hit retirement age in 2025, an average of 11,400 Americans turning 65 every day. And that record is set to hold for 20 years until the larger 'Millennial' cohort starts to trip over the line.

As is well known, many of these retirees haven't stocked away enough cash. There are acres of reports on the inadequacy of retirement savings and the questionable viability of social security. Indeed, there's a whole industry formed around encouraging people to save more.

The Alliance data shows more than half of 'Baby Boomers' turning 65 between 2024 and 2030 have assets of $250,000 or less, on average. And most can expect to live another 20 years.

Given this reality, the jarring shakeout in Wall Street stock indexes this year may force some would-be retirees to hang on in the workforce.

Michael Reid, U.S. Economist at RBC Capital Markets, reckons an enduring stock market retreat could well have a meaningful effect on the labor market and unemployment calculations.

"If you see a stock market correction, it could not only impact the spending from that cohort but we're also talking about an upside risk to our unemployment forecast. Some of those folks may delay retirement by a year or two."

Employers replacing workers who retire adds nothing to overall payroll growth, he added, but high rates of retirement remove people from the overall labor force, suppressing the participation rate and hence the jobless rate calculations.

By extension, delays to retirement may buoy the available labor force and potentially the rate of unemployment for a given level of payrolls.

PART-TIME AND PARTICIPATION

Multiple cross-currents complicate the employment picture, of course, including new limits on immigration, which has played a critical role in expanding the workforce in recent years.

Concern about worker shortages has been rising, partly due to immigration curbs, so many see higher labor force participation rates as warranted. Though prospective retirees are unlikely to fill factory roles or unskilled manual work often taken up by recent migrants.

High-frequency data on the scale of U.S. retirement is elusive, but the labor force participation rate has been declining of late, hitting a two-year low of 62.4% in February and still below pre-pandemic levels.

And at just 4.1%, the unemployment rate has now been pegged below 4.5% for more than three years.

However, other measures of unemployment aren't so rosy. A broader measure, which includes those who want to work but have given up searching and those working part-time because they cannot find full-time employment, surged to 8% in last month's jobs report - the highest since 2021.

The extent to which retirees are included in that part-time work calculation is unclear.

General anxiety is rising again within the economy - judging from business and household surveys, though not all the hard data yet. And how much of the angst translates into changed plans, decision-making and investment hinges largely on the government policy trajectory from here.

Anecdotally at least, Reuters reporting shows many older workers are sufficiently discombobulated by the combination of government upheavals and stock market volatility to worry about stopping work.

Stock values and savings pots are just one of many factors in this mix, of course, and stock corrections have come and gone quickly in the past.

But a longer-term market drawdown from such lofty levels may have more impact on the ageing U.S. population than it did in the past - adding a twist for the Federal Reserve and others to read employment market.

The opinions expressed here are those of the author, a columnist for Reuters

(By Mike Dolan; Editing by Stephen Coates)


Reuters