The share of Americans in the labor force, known as the participation rate, is hovering around an almost four-decade low as the population ages and discouraged job seekers give up looking for work, Bloomberg reported.
Federal Reserve research shows that retirees are at the forefront of the recent exodus, which blunts the impact of policy aimed at boosting the economy and the workforce.
In the two years ended 2013, 80 percent of the decrease in labor force participation was due to retirement, according to calculations by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia. And while the number of discouraged workers rose sharply during and after the recession, the group's ranks have been roughly unchanged since 2011.
That tilts the debate on whether the participation rate can fully rebound alongside the improving economy, as retired workers are unlikely to re-enter the workforce, said Michelle Girard, chief U.S. economist at RBS Securities Inc. A tighter supply of workers means wage pressures would build faster than otherwise, something Fed Chair Janet Yellen may watch as a leading indicator of inflation, Girard said.