Labor Force Participation for the 65+ Remains Below Pre-Pandemic Levels

A new analysis of Current Employment Statistics (CES) industry survey data by Bureau of Labor Statistics (BLS) economist Maria Ramos shows that employment levels have recovered across many industries. Meanwhile, the latest monthly employment data show that labor force participation rates have also recovered to pre-pandemic levels among many demographic groups, including workers ages 55 to 64. Yet the same cannot be said of the 65+ workforce. Underpinning the dynamics for this age group is that many of these workers who retired during the pandemic were already at or beyond retirement age. This makes it less likely that they will return to the workforce—though larger numbers returning is not an impossibility, especially in light of certain economic trends as well as if employers take more steps to promote an age-diverse workforce.

Historic Cross-Industry Gains

The CES data show that total nonfarm payroll employment in the United States continued to recover in 2021 from the job losses of 2020, with employment increasing by 6.7 million jobs last year. This was the largest calendar-year gain in the history of the CES employment series and the strongest relative gain (+4.7 percent) since 1978. The CES data show that nearly all major industries experienced employment gains. Industries that experienced high levels of job loss during the early months of the pandemic were among those with the highest job gains during this recovery, with leisure and hospitality leading the way, followed by professional and business services. Financial activities and retail were also back to their pre-pandemic employment levels.

While among the major industry groups only utilities saw a negative year-over-year change in employment in 2021, some parts of the economy have not yet fully recovered. A few industries, such as health care and social assistance industries, made progress in reaching their pre-pandemic employment levels but could not fully make up for the ground lost in the last two years. More recent and detailed industry data reveal that the hospital and nursing and residential care facilities sub-sectors of the health care industry had notably fewer jobs in May 2022 compared with May 2021. In some industries, the slower recovery of jobs is being driven by lower demand. However, staffing declines in hospitals, nursing, and residential care facilities largely stem from recruiting challenges and worker shortages as opposed to a shortage of available jobs—ultimately resulting in declining employment in these areas.

Gains on the Demographic Side

Labor force participation rates (LFPR), which dropped sharply after the start of the pandemic, have also recovered across many worker demographics. For example, May 2022 data show that among workers ages 25 to 34, the LFPR was 83.8 percent compared with 83.7 percent in February 2020, pre-pandemic. The LFPR for workers ages 55 to 64 was 65.4 percent in May 2022, compared with 65.5 percent in February 2020. A more buoyant labor market drew many workers back into the job market, especially as some employers responded to increased recruiting difficulty with more flexible work options and higher wages.

Yet despite these trends, in May the seasonally-unadjusted LFPR among workers ages 65 and older was 19.2 percent, remaining below the pre-pandemic rate of 20.8 percent in February 2020. A return to the job market after traditional retirement age is generally less likely than it is among younger workers; nevertheless, workers in the 65+ age group can be drawn back into the workforce under certain conditions. For some, the financial need to work in retirement is the main driver, and thus rising inflation could influence the decision to return to work. For others, better working conditions offered by employers with more flexibility and teleworking or higher wages could encourage some to reenter the workforce. Employers may also increasingly shape their recruiting efforts to appeal to a more age-diverse talent pool, creating another incentive for 65+ workers to return.

For more jobs data: Find the latest employment data in the AARP Public Policy Institute's (PPI) Employment Data Digest, PPI's monthly review of job trends for those ages 55 and over. Visit the AARP website's work and jobs section for articles on work and unemployment and job search resources.