Yahoo Finance’s Ines Ferre joins the Live show to break down how excess retirements, immigration changes, and the decline of prime-working-age men are affecting the tight labor market.

Video Transcript

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BRIAN SOZZI: Rise in the stock market and housing prices during the pandemic may have given older workers the ability to retire early at higher-than-expected levels. That phenomenon, along with other demographic changes, are contributing to an imbalance in the supply and demand of workers. Yahoo Finance's Ines Ferré has the details. Ines.

INES FERRÉ: Yeah, guys. And it's really interesting to see these demographic changes that have been going on for a while now, even prepandemic. Jerome Powell has talked about the tight labor market, about the labor shortage of about 3 and 1/2 million people, and the labor force participation, which sits below that of February of 2020. So there's about two jobs for every unemployed worker.

Now, part of this reason is because of excess retirements during the pandemic. Asset prices were going up. People felt like they could retire early. Also because of health issues, people retired early at higher levels than expected.

You also have what's called the decline of prime age working men. And there's an economist, Nick Eberstadt, who I spoke with at the American Enterprise Institute. He's been studying this for decades now.

And since the '60s, we've seen this decline of prime age working men. And that-- part of that has to do with government programs. Part of it has to do with the type of labor, with technological changes, health issues. Also, people with criminal backgrounds are less likely to be employed.

And then the other factor that's going on, also, has to do with immigration. So immigration changed also. During the pandemic, you had a large outflow of immigrants also going back to their countries. So immigration, it's a little bit tougher to dissect. But nevertheless, economists are saying that it could account for about a million workers that's-- a shortage of workers.

Why is this important? Well, because when you have a sort of slowing population, when you have 25- to 55-year-olds who are the ones are supposed to be working more, they're forming families, they are the ones that are working for the people who are older in the economy, so to speak, the people who are consuming less, the people that are on fixed income. So when you have this slowing labor force participation, that impacts, eventually, GDP. It impacts output, and also the amount of people who are paying taxes, that are paying for those programs for the elderly.

JULIE HYMAN: Well, and it's also interesting when you look at the demographic differences in unemployment among age cohorts, among race cohorts, et cetera, there are some big gaps, right, and big differences.

INES FERRÉ: Huge demographic changes among the cohorts. And I will say also, we can't underemphasize enough the fact that during the pandemic you saw asset prices go up. You saw house prices go up. In fact, the St Louis Fed came out with some figures saying that from January to October of 2022 when asset prices went down, they saw about 170,000 people from the ages of 51 to 65 returning to the workforce.

So look, as the economy slows further, yes, economists are expecting that more people will enter the labor force. They will be forced to enter the labor force. But will they enter it to fill all those positions that are unfilled, more than 10 million positions? We're not sure that it's going to get to that.

JULIE HYMAN: Right. Definitely. So still robust labor market as we watch all these dynamics. Thanks so much. Appreciate it, Ines. Good stuff.