The oldest workers in the US labor force, edged out during the pandemic by retirements and health concerns, are unlikely to ever return, potentially ending a decades-long trend amongst working seniors in America and contributing to the ongoing imbalance in the jobs market.

Labor force participation for Americans 65 or older has dropped from pre-pandemic levels while the total population for that group has risen, meaning about 986,000 fewer older people are working than would be if the participation rate held steady, according to an analysis of US Bureau of Labor Statistics data. The latest labor force participation rate for those 65 and older was 19.1% in May, down from 20.8% in February 2020.

The latest fall ends a trend that began in the mid-1980s of older workers steadily rejoining the workforce. And economists say a variety of factors will keep those workers who have left jobs from ever returning.

"We saw a large exodus of those on the cusp of retirement during the pandemic amid a rise in asset values, the health-related risk the pandemic itself caused, and some reevaluation of life in general," said Shannon Seery, an economist with Wells Fargo. "The pandemic thus accelerated a trend we anticipated would unfold over a number of years, adding to labor shortages due to the high-qualified nature of this portion of the labor force."

Reversing history

Since the mid-1980s, the labor force participation rate, the percentage of the population either employed or looking for work, for Americans age 65 and older, had risen steadily until the pandemic. At the end of 1985, the participation rate for Americans 65 or older was 10.7%, accounting for roughly 2.9 million workers, according to the Bureau of Labor Statistics.

By 2019, about 11.1 million older Americans were in the labor force. That number was essentially unchanged in May 2023, while the overall population of those 65 and older grew by more than 4.1 million people from 2019, according to Bureau of Labor Statistics data. Had the 20.8% labor force participation rate of early 2020 held steady into 2023, more than 12 million people over the age of 65 would be in the workforce.

The pandemic caused steep declines in the labor force participation rates throughout all age groups, but most groups have fully recovered and many rates within the groups defined as prime working age, have risen above their pre-pandemic levels.

The participation rate for workers between the ages of 40 and 44 has increased from 83% to 83.6% from February 2020 to May 2023, for example, while the rate for workers between the ages of 50 and 54 has jumped from 80.2% to 81.3% over that stretch.

The participation rate for workers between the ages of 65 and 70 has fallen from 20.8% to 19.1% and the rate for workers 70 to 74 has dropped from 21.1% to 18.7%, according to the latest government data.

The trend is particularly acute in the number of older men who have left the workforce. In May, the labor force participation rate for men 65 years and older was 22.9%, down from 25.2 in February 2020. If the participation rate for this group had held steady from pre-pandemic levels, there would be roughly 606,000 more workers in the job market.

These more senior workers are not coming back, said Augustine Faucher, chief economist of The PNC Financial Services Group.

"I don't see the labor force participation rate for older men coming back anytime soon," Faucher said. "I think these changes are structural and likely to persist over the longer run."

Structural changes

Many older men lost their jobs when the pandemic hit and then dropped out of the labor force, likely permanently. Government stimulus efforts, health worries amid the pandemic, lost opportunities for job advancement and higher household wealth, due to both the pandemic stock and real estate boom, all contributed to this trend, Faucher said.

"I think that many of these people were planning to retire at some point, and when the pandemic came along they just decided to retire then," Faucher said.

Even with wage growth continuing and employers struggling to fill millions of job openings, these older Americans are unlikely to return to work.

"Retirements are traditionally stickier exits from the labor force, meaning its less likely for these workers to return, and that appears the case today as well, with many of these workers having had every opportunity to come back into the labor force over the past year, yet they haven't," Seery with Wells Fargo said.

The participation rate among the oldest Americans is unlikely to return to lows seen decades ago as the share of older Americans in the overall population increases and the need for income keeps millions of senior citizens from leaving employment.

"High inflation, high borrowing costs and the prospect of slightly faster wage growth may help [keep the participation rate from falling much more]," said James Knightley, chief international economist with ING. "Higher inflation is likely to mean people on fixed incomes feel financial pressure much more and perhaps delay retirement."

In addition, working conditions look increasingly different today and the trend of Americans working longer into life is unlikely to change, said Faucher with PNC.

"Given advances in healthcare, the shift away from physical labor, and the increase in the Social Security normal retirement age, we generally have Americans working longer than they did 30 years ago," said Faucher.