Prices have soared over the past year, putting a strain on the household budgets of many. Job openings reached 11 million at the end of last year, pushing the ratio of vacancies to unemployed Americans to 1.9 to one. Yet employers are still have trouble finding workers.
This has surprised and alarmed officials at the Federal Reserve, who fear that the imbalance between the supply and demand for workers will drive inflation to stay too high or even rise further. The decline has largely been concentrated among older Americans. While the prime age labor force participation rate—which looks at Americans between 25 and 54—has not fully recovered, it reached 82.7 in January, just three-tenths of a percentage point below the February 2020 level. For workers older than that, the participation rate is just 38.7, down from 40.3 prepandemic.
How people respond to a rise home prices depends on their age and whether they rent or own. Renters of any age work more—have higher participation rates and hours worked—when prices rise. Younger homeowners also work more when prices rise, perhaps because they anticipate higher housing costs in the future. Middle-aged homeowners are unresponsive to increases in home price. Older homeowners, however, are more likely to reduce labor supply when housing returns are high, the paper finds.
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