Dive Brief:
- The labor force participation rate of U.S. civilians 55 and older fell to 36.9% last month from 38.1% a year earlier, a shrinkage in the labor market that bolsters the business case for artificial intelligence, RSM US Chief Economist Joe Brusuelas said Monday.
- The retirement of so-called Baby Boomers drives much of the decrease in the portion of civilians either working or looking for a job, he said in a report, noting that the proportion of citizens age 65 and older rose to 18% last year from 12% in 2005.
- “We are simply witnessing a historic exit from the American labor market,” Brusuelas said. “American businesses will need to turn to technology as a substitute for labor,” he said, adding “that means more artificial intelligence, not less.”
Dive Insight:
The falling participation rate among older workers may partly allay concerns that demand for AI will fall short of a coming surge in supply.
Worldwide spending on AI will balloon 47% this year to $2.6 trillion from $1.76 trillion in 2025, according to Gartner, exceeding the gross domestic product of both Canada and Australia. By 2030, AI investment will rise 120% more to $5.62 trillion.
“Those who are worried about whether there will be sufficient demand for AI might want to reconsider,” Brusuelas said.
Restrictive immigration policies under President Donald Trump have also crimped the supply of labor, he said.
During 2025, the first year of Trump’s “immigration crackdown,” the U.S. recorded negative net migration for the first time in at least 50 years, according to the White House.
The Trump administration has deported more than 605,000 illegal aliens and 1.9 million have voluntarily left the U.S., the White House said.
“A quarter of a century ago, when it became clear that the American economy would age as the boomers left the labor force, economists assured themselves that Washington would turn to immigration to attract high-value-added workers,” Brusuelas said. “That turned out not to be the case.”
Tough immigration policies and the pullback from the labor force of workers 65 and older “are having a significant impact on the supply side of the American labor market,” Brusuelas said, noting that labor supply has shrunk 0.77% during the past year.
The two trends are the biggest factors explaining why the U.S. economy needs to generate only about 35,000 jobs each month to maintain a stable labor market, he said.
The U.S. economy shed 23,000 jobs last month and revisions to labor market results trimmed the total number of jobs added by 103,000 during May and June, the Labor Department said Friday. The unemployment rate fell to 4.1% in July from 4.2% in June.
