Bank of America Corp. (NYSE: BAC) economists Stephen Juneau and Aditya Bhave have linked the stock market boom to a sharp decline in labor-force participation among workers age 55 and older, saying the surge in equity wealth is helping accelerate retirements.
In a research note, Juneau and Bhave wrote, "Labor force participation is collapsing among older workers. We think the strength of the equity market is partly to blame." Workers age 55 and older have seen their labor-force participation rate decline from 38.6% in August 2024 to 37.2%, reported CNBC on Monday.
The economists called this trend a "stock-fueled retirement party."
Wealth Effect
The S&P 500 returned 26% in 2023, 25% in 2024 and 18% in 2025, including reinvested dividends, according to data compiled by Aswath Damodaran, a finance professor at New York University. The index was up about 16% in 2026 as of early Monday.
Household and nonprofit net worth increased by $12.8 trillion to $195.9 trillion in the second quarter, driven mainly by strong stock returns, according to Federal Reserve data.
Fidelity’s latest retirement analysis showed the average 401(k) balance rose to $155,800 in the second quarter from $137,800 a year earlier.
Shrinking Workforce
Workforce exits among older workers have helped keep unemployment relatively low by making space for job seekers and new entrants, according to economists.
The labor-force participation rate for the broader U.S. workforce also fell to 61.4% in July.
A record number of people are reaching traditional retirement age, with more than 4 million young baby boomers each year expected to turn 65 from 2024 to 2027, according to the report.
Stock Risks
If AI optimism declines and the stock market becomes volatile, economists said recent retirees could face financial risks.
Thomas Ryan, a North America economist at Capital Economics, said some workers could return to the labor force if stocks fall, according to CNBC.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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