Long-Term Trends in Employment by Age Group
The labor force participation rate (LFPR) is a simple computation: You take the civilian labor force (people aged 16 and over employed or seeking employment) and divide it by the civilian non-institutional population (those 16 and over not in the military and or committed to an institution). As of October, the labor force participation rate is at 62.7%, down from the previous month.
The first chart below splits up the LFPR since 1948 in two ways: by age and by gender. For the former, we have the 25-64 age cohorts to represent what we traditionally think of as the "productive" (pre-retirement age) workforce. The BLS has data for ages 16 and over, but the historical trend toward college attendance has been quite dramatic over this timeframe. So let's use age 25 as the lower boundary to reduce the college-years skew.
Note the squiggly lines for the productive years and jumbled dots for the older cohorts. These result from the use of non-seasonally adjusted data. The BLS does have seasonally adjusted data for many cohorts, but not the older ones, so the chart uses the non-adjusted numbers for consistency.
The next chart eliminates the squiggles with a simple but effective seasonal adjustment suitable for long timeframes, a 12-month moving average. There are some callouts to quantify the data in 1948 and the present.
It doesn't take a Ph.D. in sociology to recognize some significant changes in the chart above. The growth of women in the workplace, the solid purple line, was a major trend. The financial advantage of the two-income household was boosted by Title VII of the Civil Rights Act of 1964, which prohibited discrimination by race, color, religion, sex, or national origin. The Age Discrimination in Employment Act of 1967 helped to stabilize the decline in the 65 and over participation rate, at least until the 11-month recession that started in December 1969.
As for the age 25-64 cohorts (solid lines above), the participation rate for men peaked way back in May 1954 at 95.8%; for women, it was almost 70 years later in 2023 at 73.0%, and for the combined cohort is was in March 1998 at 80.2%. The 65+ cohort peaked in April of 1950; the men in this group peaked in July 1949 and the women, interestingly, in February of 2020. The highest participation rate among all cohorts right now is men ages 25-64 at a rate of 84.7%. Women ages 25-64 is currently at a rate of 73.0%, surpassing its peak in 2000 (72.7%).
Here's a table summarizing the chart and paragraph above:
The dotted lines representing ages 65 and over also illustrate some dramatic changes. A vision of the good life in retirement, assisted by a burgeoning Social Security system, was a standard expectation for pre-boomer generations. The advent of Medicare in 1965 and Social Security cost-of-living adjustments (COLAs) in 1975 added to their confidence in their golden years. However, the LFPR for the "elderly" flattened out in the mid-1980s and then began increasing — slowly at first and more significantly around the turn of the century, as the numbers for the productive cohort continued to decline. Since the COVID recession, this cohort dropped rapidly, likely due to early retirements and possibly the group's COVID risk. The women's subset has started bouncing back from this more rapidly than the men. The next chart gives us a clearer look at the relative patterns of growth and contraction since 2000.
Since January 2000, the participation rate for all the elderly has soared by 54.9% and for elderly women by 76.8%. The growth for men reached a new high in March of 2020 (the official start of the recession) and women in February of 2020. The directional arrows highlight a striking trend for the older cohorts. The growth for women has a clear upward slope while the growth for men has a slightly downward slope.
Labor Force Participation Rate by Age Groups
The next chart shows the data for six age cohorts since 2000 with no gender distinction. Two recessions and two savage market selloffs were drivers of the trends we see here. For this close-up, we see the BLS's seasonally adjusted data for the four cohorts ranging in age from 16-54, but only non-seasonally adjusted data is available for the two older cohorts, which accounts for the more noticeable squiggles.
For an apples-to-apples comparison, here is the non-seasonally adjusted data for all six cohorts smoothed with 12-month moving averages.
Another interesting, if less conspicuous, line in the chart of the six age cohorts above is the dark purple one, representing ages 45-54. Household income data tells us that historically this age bracket constitutes the peak earning years. For more on this topic, see this commentary.
While the LFPR growth for the elderly is the most striking feature in the chart above, we also see a noticeable decline in the youngest cohort. A significant driver of this trend has been the decision to stay in (or go back to) school for more education. Supporting evidence is found in the eye-popping growth of student loan debt, especially since the onset of the great recession. To be sure, some of that trend is accounted for by older cohorts heading back to school in hopes of improving their employment prospects.
Note: The Q2 2023 data point in the chart above is the most recent.
Let's close this retrospective with a pair of pie charts based on annual data for the Civilian Labor Force (as opposed to the LFPR) to illustrate the change in the six cohorts from 2000 to 2022.
For some simple math: In 2000, the three younger cohorts constituted 66% of the labor force. Now they have shrunk to 57%, which means the 45 and older workers have grown from 34% to 43% of the labor force. In the late 1990s, the dream of early retirement was common among the Boomers. But the reality is that an increasing number are delaying retirement and many who did retire have now re-entered the workforce.
There is little doubt that the two 20th century recessions and major market selloffs devastated the retirement plans for a great many of the individuals nearing that milestone.
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