Americans in Their Prime Are Flooding Into the Job Market

The Sustainable Development Goals (SDGs)

• Goal 1: No Poverty
• Goal 3: Good Health and Well-being
• Goal 5: Gender Equality
• Goal 8: Decent Work and Economic Growth
• Goal 10: Reduced Inequalities

The Core of the American Labor Force

The core of the American labor force is back. Americans between 25 and 54 years of age are either employed or looking for jobs at rates not seen in two decades, a trend helping to counter the exodus of older baby boomers from the workforce. Economists define that age range as in their prime working years—when most Americans are done with their formal education, aren’t ready to retire and tend to be most attached to the labor force.

1. In the first months of the pandemic, nearly four million prime-age workers left the labor market, pushing participation in early 2020 to the lowest level since 1983—before women had become as much of a force in the workplace. Prime-age workers now exceed prepandemic levels by almost 2.2 million.
2. That growth is taking a little heat out of the job market and could help the Federal Reserve’s efforts to tamp down inflation by keeping wage growth in check.

Women Lead the Way

The resurgence of midcareer workers is driven by women taking jobs. The labor-force participation rate for prime-age women was the highest on record, 77.8% in June. That is well up from 73.5% in April 2020. Men, however, tend to be employed at higher rates. The overall prime-age participation rate rose in June to 83.5%, the highest since 2002. The big draw: a tight labor market. The unemployment rate has hovered near a half-century low for more than a year, and job openings outnumber the ranks of unemployed. Employers can’t be as choosy or selective, William Rodgers, vice president and director of the Institute for Economic Equity at the St. Louis Fed, said earlier this month.

Rising Wages Lure Workers, Counter Demographic Shifts

Employers raised wages, offered employees more flexibility and improved benefits in recent years. Average wage gains remain elevated this year and have recently surpassed inflation. And Americans are logging more hours of work from home than they did before the pandemic. Employer recruitment efforts helped offset some broader demographic shifts, including an aging population and rise in retirements.

Trends Could Turn if the Economy Cools

There are concerns that the Fed’s campaign to bring down inflation through higher interest rates will cause unemployment to rise too much and push some of the most vulnerable workers back to the sidelines. The median forecast among Fed officials shows the unemployment rate rising to 4.1% by the end of this year and 4.5% next year from 3.6% in June, suggesting the economy will shed tens of thousands of jobs. Labor-force participation tends to be cyclical, rising when the economy is strong and falling during downturns. A weaker labor market combined with structural barriers to employment could cap further gains.

Conclusion

The increase in prime-age workers is a positive development for the American labor force, contributing to economic growth and countering demographic shifts. However, there are concerns about the potential impact of rising interest rates on unemployment rates and the need to address structural barriers to employment. Continued efforts to achieve the Sustainable Development Goals, particularly Goal 8: Decent Work and Economic Growth, are crucial in ensuring inclusive and sustainable economic development.

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Write to Jeffrey Sparshott at Jeffrey.Sparshott@wsj.com