Signs are mounting that high inflation is helping propel
more people—including retirees—back into the labor force, economists say.
That could be good for the economy overall, as a growing
workforce boosts the economy’s growth prospects, and it could ease staffing
shortages that have pushed up wages and added to price pressures. But for many
people, including those relying on pensions or limited savings, rising prices
are an unwelcome development forcing them back onto the job market.
“We’re beginning to see the migration of the older cohort
who expected to live on fixed income in a low interest-rate and low inflation
environment,” said Joseph Brusuelas, chief economist at RSM US LLP. “That has
not materialized; therefore they have to come back to the labor force to create
the conditions so they can retire.”
“Really what you’re dealing with is an inflationary shock
that has elicited a change in behavior,” he added.
The share of people age over 55 either working or looking
for a job—their labor-force participation rate—rose to 38.9% in March from
38.4% in October, according to the Labor Department. More than 480,000 people
in that age group entered the labor force during the past six months, according
to the three-month moving average, which smooths out volatility. That was more
than the 180,000 who entered the labor force in the six months before the
pandemic struck.
The job market improved for workers of all ages during the
past six months, with the three-month moving average for the overall labor
force rising by 2.5 million, raising the national participation rate to 62.4%
in March from 61.7% in October.
Analysts say a number of factors are prompting more people
of all ages to go out and look for jobs: Covid-19 vaccinations, school and
daycare reopenings, more remote and flexible work opportunities, an end to
pandemic-era government support and rising wages.
But they say another key factor is the recent jump in
year-over-year inflation, to nearly 8% in February from just over 5% last
summer, as measured by the Labor Department’s consumer-price index. The
department is set to release on Tuesday its CPI report for March.
Roughly 2.6 million Americans retired earlier than expected
between February 2020 and October 2021, according to estimates from Federal
Reserve Bank of St. Louis senior economist Miguel Faria-e-Castro. Now many are
returning to work at rates not seen since March 2020, according to jobs site
Indeed.
The rise in prices is a strong motivator for older people to
either postpone retirement or reverse it, some of them say.
Former paralegal Lisa Purcell, 57 years old, has been
retired for health reasons for over two decades, and, despite her concerns
about catching Covid-19, she said she is considering looking for a job because
of rising inflation. She said she and her husband, 53, a retired
energy-industry engineer, are on a very tight budget until she qualifies for
Social Security benefits.
“With everything going up, prices and stuff, we did our
finances—we’re like a year and a half short now” on money to cover living
expenses until she starts receiving Social Security checks, said Ms. Purcell,
who lives in Golden Valley, Ariz. “We already cut back everything we can cut
back. I do my own hair, I cut his own hair. It’s become obvious one of us has
to go back to work.”
Households’ expectations of the near-future path of
inflation surged in March from February to new high, according to a report from
the Federal Reserve Bank of New York. That means anxiety for many retirees and
those near retirement who are trying to map out their incomes amid an uncertain
near-term future.
“For retirees, it’s very hard to know if they’ve saved
enough,” said Kathryn Edwards, an economist at Rand Corp., “it’s a big X Factor
that’s becoming more unpredictable” due to rising price pressures.
Higher inflation is also prompting some workers who haven’t
yet retired to reassess their options.
Daniel Fitzpatrick, 64, a software account manager in
Atlanta, said he is paying closer attention to his expenses due to the rise in
inflation.
“Retirement for many people is going to become something of
a luxury and the horizon they foresee is going to move away,” said Mr.
Fitzpatrick, who plans to retire at 70 and work part time after that.
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