Monday, December 12, 2011

Will Baby Boomers Fix Unemployment?

Maybe the recent drop in the job market’s participation rate wasn’t entirely due to discouraged workers giving up on finding a job.

Earlier this month the Bureau of Labor Statistics (BLS) released a lower unemployment figure and the component data showed that it was a result of both an increase in jobs and a decrease in the number of potential workers.  When examining these numbers I assumed the decrease was due to frustrated job seekers putting their searches on hold.

But according to a recent Bloomberg article some of the drop in the overall size is of the workforce is because baby-boomers are starting to hang up their business suits for good.

Think of all those 50 and 60-somethings.  As they retire opportunities arise for the jobless. And, because their numbers are large and their unemployment rate relatively low, many additional jobs will become available as more hit the 65-year milestone.

There’s one caveat that is important to note, however.  A retirement decision is often contingent on the performance of an investment portfolio.  The stock market, although still showing volatility, rebounded well from its low in 2009.  But if a future shock – like a unexpected European sovereign default – causes equity prices to plunge potential retirees may decide to stay in their occupations well past their 65th birthday.

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