The share of Americans coming out of retirement and back into the workforce is finally increasing and could be key to bringing the labor force participation rate back to its pre-pandemic levels.
More than 2.6% of retired workers returned to work in October, the highest since April 2020, according to an analysis by Indeed of data from the U.S. Census Bureau’s Current Population Survey. In the past three months, about 625,000 people went back to work after saying they had retired.
At the same time, the labor force participation rate remained at 61.6% in October, significantly lower than 63.3% in February 2020, according to data by the Labor Department.
“A lot of the excess retirements could be people who said they're retired but were just out of work,” Nick Bunker, director of research at Indeed, told Yahoo Money. “A tighter labor market will give them the opportunity to return to employment as they would have liked otherwise.”
Around 3.4 million of the 5 million who exited the workforce since the start of the pandemic are over 55, according to a note by Goldman Sachs from November 11. Of those 3.4 million exits, Goldman estimated that 1.5 million were early retirements, 1 million were natural retirements, and 900,000 exited the workforce for other reasons.
“Shifts into retirement tend to be stickier than other labor force exits,” Goldman Sachs said in the note. “We therefore expect that the participation shortfall from early retirees will unwind relatively slowly through fewer new retirements going forward.”
‘Demand is strong and wages are growing quickly’
The job market is also looking better for older workers as vaccination rates increase, alleviating health risks, and employers offer higher wages to combat labor shortages.
“They are returning to the labor market where demand is strong and wages are growing quickly,” Bunker said. “There are some enticements there as well. There's a positive opportunity out there for folks.”
Job openings remained elevated in September after reaching a record high in July, while the quits rate — a sign of workers’ confidence — reached a new high of 3% in September, according to the Labor Department. Additionally, workers in the bottom 25% of earners saw wages grow by 4.9% in September year over year, according to the Federal Reserve Bank of Atlanta, while higher earners saw an increase of under 4%.
The rise in retirements during the pandemic was driven by the “steep decline in the percentage of retirees returning to work,” according to a paper by the Federal Reserve Bank of Kansas City. The trend of more retirees returning to the job market — if it continues — may mean that some of those early retirements during the pandemic were never supposed to be permanent, according to Bunker.
“If we do see a continued pickup in this sort of ‘unretirement,’ that could mean that more of the retirements are temporary,” he said. “If we do see continued strong demand for workers and continued economic growth, we will probably see folks going into a job from retirement. That will probably continue to pick up.”