By Conor Sen / Bloomberg Opinion
There are plenty of reasons to be concerned about the direction of the U.S. economy right now. The hiring rate is sluggish. The housing market is dormant, with younger Americans shut out. Borrowing costs are high and moving higher as Congress pieces together a deficit-expanding fiscal package. Yet the economic data continues to paint a picture of resilience.
That’s thanks to older Americans, who are helping to keep the economy from falling into recession. They are less affected by labor market uncertainty, less likely to be struggling in the housing market (the average age of homebuyers is a record 56), and they will be recipients of the growth in federal spending. This group is providing fuel to the economy at a weak point in the economic cycle, something we didn’t see as much in the mid-2000s or mid-2010s.
One of the best ways to visualize this is to track the growth in the number of Social Security recipients. There were a record 11,200 Americans turning 65 every day in 2024, compared with a daily average of 10,000 the decade before. The number of Social Security recipients grew by about 500,000 back in 2005, before the baby boom generation began turning 65. In 2015, as the boomer retirement wave got underway, that had grown to 1.2 million. Over the past 12 months, we’ve seen the count expand by 1.8 million.
Retirees beginning to receive Social Security benefits may well be earning less than before, but from a macroeconomic perspective, this constitutes additional income. Their retirements also open job vacancies or, given the current state of the labor market, allow younger workers to keep their positions at companies with multi-generational workforces that are looking to cut costs. A “low hiring, low firing” job market isn’t great, but the “low firing” part is good news all the same. And recessions are bad for Americans of all ages; an economy where most people are employed but it’s hard to get hired or afford to borrow is still better than an economy where millions are being laid off.
To gauge just how meaningful this trend is, I compared the growth in Social Security beneficiaries with job growth. Between 2004 and 2006, the U.S. added 6.6 million jobs and 1.3 million Social Security beneficiaries, or a ratio of 5-to-1. Between 2014 and 2016, the U.S. added 8 million jobs and 3.5 million Social Security beneficiaries, for a ratio of 2.3-to-1. Over the past year, we have added 1.9 million jobs and 1.8 million Social Security beneficiaries, for essentially a 1-to-1 ratio. Thanks to Social Security, the U.S. is adding 150,000 new incomes every month on top of whatever new jobs are created.
That’s helping to sustain consumption and economic activity at a time of slowing, but still positive, job growth and a muted hiring rate, particularly for young people. And of course, while Social Security benefits themselves are modest, many retirees have additional sources of income between pensions and investments.
After all, older Americans have the lion’s share of the country’s wealth. As of the third quarter of 2024, Americans 55 and older held nearly 70 percent of all household wealth, up from 65 percent a decade prior, according to Federal Reserve data. As long as the housing and financial markets don’t plunge, that’s tens of trillions of dollars of assets either still earning income or available to be sold to support consumption.
This group is helping to sustain the housing market as well. One way to think about the surge in the median age of homebuyers is that younger Americans are being priced out much more the older Americans, who tend to already be homeowners and have paid-off homes or have significant levels of home equity. About 60 percent of real estate wealth with households is in the hands of those 55 and older.
The luxury homebuilder Toll Brothers Inc. said on its earnings call Wednesday that 24 percent of their customers paid for their homes with cash, and many of those who took out mortgages made significant down payments using the home equity from their existing properties.
Taken together, older Americans are dampening the volatility of the economic cycle. There are 38 million Americans age 55 and over who are employed, an all-time high. These people are going to continue to grow Social Security’s rolls by millions over the next several years and be able to transact in the housing market regardless of what interest rates are doing. But by helping keep budget deficits and interest rates high, they’re squeezing private borrowing and preventing younger Americans from buying homes, contributing to a feeling of stagnation. Still, the steady economic data of the past two months should remind us that it’s going to take a huge shock for the economy to change course in a major way despite the turmoil of tariffs and now a colossal budget bill.
Conor Sen is a Bloomberg Opinion columnist. He is founder of Peachtree Creek Investments.
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