“Older workers have been a boon to supply since about 2016,” said Adam Schickling, a Vanguard senior economist. “As a result, they’ve helped keep wages and, in turn, broader inflationary pressures lower than they might have been.” The elevated participation rate for older workers faces headwinds in coming years as the cohort collectively ages, as the top line in the chart suggests, but we expect the dynamic of retirement postponement to persist through 2024, putting upward pressure on the unemployment rate as more people seek available jobs.
“It’s important to put this increase in perspective,” Schickling said. “A 5% unemployment rate would still represent a strong labor market by historical standards. This modest loosening, however, is a bit of good luck for the Federal Reserve as it aims to bring inflation back to its 2% target.”
The views below are those of the global economics and markets team of Vanguard Investment Strategy Group as of December 21, 2023.