Why are labor markets so sluggish? Look to older workers.

Friday’s labor market report shows the economy continues to recover slowly from the pandemic. That sluggish pace is likely to continue and it seems older workers are the primary culprit.

It’s clear there are millions of jobs for the taking if only people would take them. The Bureau of Labor Statistics reported last month a total of 10.4 million job openings on the last business day of September. This is dramatically higher than the total number of unemployed people; there were only 0.7 unemployed people for every job opening in September, the last month for which we have data. This is a record-low ratio and consistent with a full-employment economy in which everyone who wants a job has one.

Yet employment has yet to recover to pre-pandemic levels. As of November, there were still 3.9 million fewer jobs filled than there were in February 2020. This is the labor market conundrum: Why do millions of people who had jobs almost two years ago not want them today?

The data on labor force participation - the number of people eligible to work who are looking for a job - provide some tantalizing clues. It dropped from a pre-pandemic level of 63.3 percent in February of 2020 to a low of 60.2 percent in April 2020, and then quickly rose to 61.4 percent in June 2020 as initial lockdowns ended. Since then, it has risen only by a scant

0.4 points, hitting a post-pandemic high of 61.8 percent in November. In other words, the general economic reopening has yet to attract millions of people back to work.

The stagnant overall rate, however, masks significant improvement in segments of the workforce. The labor force participation rate among so-called prime-aged workers, those between the ages of 25 and 54, has risen more quickly than the overall rate, from 81.2 percent in June 2020 to 82.1 percent in November 2021. That’s more than double the increase in the total rate. Moreover, prime-aged workers are reentering the labor force in recent months at an even faster rate. The participation rate skyrocketed from 81.3 percent in May 2021 to its current level. People in the prime of their life are coming back to work, and relatively quickly.

But older workers, those 55 and up, are still holding back. A little more than 40 percent of this demographic were in the labor force in February 2020, but only 38.4 percent are today. That figure is identical to the level last May, when the economy was largely shut down. Almost two years into the pandemic, they are still not coming back to work.

Some have speculated that these workers are retiring early, but data from the Social Security Administration do not support this view. People taking early retirement would be expected to apply for Social Security retirement benefits, which they can do as early as age 62. But the number of people receiving old-age pensions from Social Security has increased at a slower rate since the pandemic began than it did before. Roughly 50 million people received retirement benefits from Social Security in October, an increase of only 650,000 people since December 2020. That’s substantially less than the increase of 1.4 million people seeking benefits between December 2018 and 2019 and 1.1 million between December 2019 and 2020.

This figure is surely affected by the large number of senior citizens who have died from covid-19. The Centers for Disease Control and Prevention reports that the disease killed about 584,000 people aged 65 or older, with another 112,000 55-to-64-year-olds succumbing to the virus. Many of these people would have lived but for the pandemic, increasing the number of people receiving retirement benefits. But even if one assumes all of them would be alive today, there still would not be an abnormally large increase in Social Security beneficiaries. Older people are dropping out of the workforce, but they aren’t retiring in the classic sense of the term.

Labor force participation is also increasing slowly among older workers who are nowhere near retirement age. BLS data show that participation is increasing most rapidly among workers between 20 and 34 years of age. The participation rate for workers aged 35 to 44 increased by a paltry 0.2 percent since last November, and the rate for people between 45 and 54 rose by only 0.4 percent. Anyone middle-aged and up is much likelier to be leery of reentering the workforce than younger Americans.

Clearly, many older workers have changed their minds about the relative value of working. Simple quick fixes, such as this summer’s Gopled early termination of supplemental unemployment benefits, are not likely to alter this fundamental shift in outlook. The consequence of these choices means that our economic recovery is likely to remain sluggish for quite some time.