Morning Brief: Retirements accelerated in the pandemic

Myles Udland breaks down Tuesday’s Morning Brief, which details America’s continued economic recovery and the reshaping of the labor market post-pandemic as the surge in retirement could be a defining factor in the national labor shortage.

Video transcript

BRIAN SOZZI: Let's get back to all things jobs here. Because this is where we find our very own Myles Udland in today's "Morning Brief" newsletter. Myles, really enjoyed this one. I enjoy every one, but this one in particular, because you're highlighting something in the jobs market that really is holding back a potential recovery.

MYLES UDLAND: Yeah, and it's a recovery in the sense of what is the total amount-- or what's the total number of people who are in the labor force today versus pre-pandemic. So this note crossed our desk from Capital Economics several days ago. And so this data or this take is basically not inclusive of what we're seeing in today's report. It's a bigger picture thought about where the labor market is right now.

So we had 164 and 1/2 million folks in the labor force, give or take, as we headed into the pandemic. As of June, we now have 161-- we'll call it 161.1 million. So you see a gap there of about 3.4 million people. 3.4 fewer million people are in the labor force, which means people who are both working and who are looking for work and who are of working age than we had before the [AUDIO OUT].

You know, now this is looking at this and saying, OK, so how are we going to fill that gap? Where did those people go? How are they coming back? And something they looked at is the retirement rate in the economy during the pandemic and then after. And it's maybe a little bit hard to see on this chart because it does go back 30 years. And so it does help to give us a little bit of perspective here.

But we can see this-- the little line that pops above the dotted line. The dotted line is the trend of the rate of retirement as a percent of the population. Obviously accelerating as the population ages. But we see this big spike going into the pandemic and then after the trend remains above pre-pandemic levels. So retirements accelerated into the teeth of the pandemic and then have stayed elevated since.

And the work from Capital Economics suggests that of those 3 and 1/2 million or so folks we are still looking for to rejoin the workforce, upwards of 2 and 1/2 million of them may have been accelerated retirements, which means the shortfall in the size of the labor force may only be a million. And so, after today's data, maybe it's closer to 900,000 because, of course, job creation is the net of people coming into the labor force and people coming out of it, right? So we saw a positive move today, but the overall size of the labor force, we saw [AUDIO OUT] overall size of the labor force only rising about 200,000 last month. So we still have to bridge some of that gap.

And I think it's just worth keeping this data in mind, especially in the context of some pieces-- some data that I cited earlier in the program, which was prime age, 24 to 54-year-old employment participation ticking up significantly in May and June, actually to the best levels that we have seen since pre-pandemic time. So folks who are, Sozz, our age, who are supposed to be working, supposed to be part of the labor force, we are reengaging with the labor force at a faster rate than the overall population, notably 55 and older workers, who have made up a larger share of the workforce over the last decade.

And so it is going to be incumbent upon our peers within the prime age population to get jobs at a higher rate overall, as we see accelerated retirements. But those accelerated retirements are worth keeping in mind in the context of asking this question, where did the workers go? Well, they left, and they're not coming back.

And this is the demographic factor that we have been hearing about from economists for a very long time. It'll be interesting to see how much, how deep the scars are with respect to these retirements. But it is certainly a meaningful part of this conversation and I think one that, look, again, today, very exciting. We're a news program. We're on the news. Here is today's news. But I think overall, this is the bigger picture conversation about how healthy the labor market really is.

BRIAN SOZZI: Wow, my parents are going to let me have it after I voice this one. Both are recently retired. I wonder if there is some way for companies to reach back out to the retired workers and incentivize them or do something with these pool of workers to have them work in some capacity to address areas they might need employment. Now I can't imagine my mom or dad going to work at a Burger King. They could probably say, screw your $1,500 bonus. I don't want it. I've been working for 45 years. But I imagine there is something they could do.

MYLES UDLAND: Well, so let's do more anec data, right? Someone close to me-- I won't say who-- was recently-- let's call it, they were of retirement age. But they were retired by their employer. And their view is, yeah, I mean, I would work again, but I don't want to work all the time. I would do contract work. I'd do a few things here and there. But that every day, eight Zoom calls, 9:00 to 6:00, like, that-- we're done. We're done with that, you know? That's over.

And OK, so maybe you can do that, but, Sozzi, that's more expensive. I mean, that's more-- these are experienced people who have been in the industry, depending on what they're in, you know, 20, 30, 40 years, in some cases. To bring that worker back, to try to incentivize them to come back, is the cost of, what, three, four entry level workers, in some cases. And granted, it's more difficult to take a college kid and try to figure out what to do with them. And then you have leadership vacuum and experience vacuum and all those kinds of things.

But I think that plays a role as well, Sozz, right? You've got your oldest workers are going to be your highest paid workers. And even though it may be worth it for you to try to bring them back, the cost does become prohibitive. And so it creates this kind of vicious cycle, where you have a lot of folks who could still work, are expensive to get them to work, and also are happy not working perhaps.

BRIAN SOZZI: Yeah, Myles, I'm imagining my mom flipping burgers at a Burger King. Maybe $40 an hour to get my mom off the sidelines and go flip those burgers or fries. But I'm going to try to shut off my phone because I'm sure it's not looking very pretty right now. Sorry, mom. Sorry. I don't want you working at Burger King. You've worked very hard your entire life. We'll leave it there for now.