SmartMoney Blogs

A blog about living in and planning for retirement

The Downside of an Older Workforce

Market watchers welcomed last week’s surprisingly upbeat jobs report, but one overlooked trend may not bode so well for the economy, say some analysts: the graying of the workforce.

Workers age 55 and over accounted for 21.4% of the employed population in the third quarter, according to data released last week by the U.S. Department of Labor. That’s the highest level on record, up from 18.4% in 2008 and 14.6% in 2002. These older worker also appear to be winning out over their younger peers in the current economic recovery: Since January 2010, these boomers have landed 70% of the new jobs created, an analysis by global outplacement consultancy Challenger, Gray & Christmas found.

While that’s good news for the over-55 set, some economists say it could put the brakes on the already sluggish U.S. economy. For one thing, consumers age 55 and up who are still working are less likely to spend — and more prone to save — than their younger counterparts, says John Lonski, chief economist for Moody’s Analytics. Indeed, the most recent consumer spending figures from the Bureau of Labor Statistics show that people age 55 to 64 spent an average of $53,600 in 2011, or 8% less than consumers age 45 to 54. Experts point out that many pre-retirees are socking away extra to make up for the hit to their 401(k)s during the 2008 downturn.

That means older consumers are playing a not insignificant role in holding back the rebound in consumer spending. Weaker spending also often leads to slower earnings growth for companies — and slumping share prices, experts say.

To be sure, economists say there are plenty of other factors tamping economic growth, including the European crisis and uncertainty surrounding the upcoming presidential election. They also point out that many older Americans who lost their jobs during the recession are struggling much more than younger workers to find new gigs. An analysis by the AARP Public Policy Institute found that the average duration of unemployment for job seekers age 55 and up  is now 56 weeks, compared with 37 weeks for younger workers. Many older workers have been forced to take jobs with much lower salaries than those held before the market meltdown.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.