“We have been looking at spending based on income, but you can do similar analysis based on age and you see the same thing,” Zandi told Fortune. “It’s pretty top-heavy. If you look at the distribution of wealth or income within the folks that are in their 50s, 60s, and 70s, that’s also very skewed. There’s reasons to be nervous there, because you’ve got boomers that are lower income, that are living on the edge, [boomers] of middle income, that are making it by—and when i say income, I mean income and wealth—so the same concerns we have about the broader income and wealth distribution applies to that group of older Americans.”
“It probably makes the economy more vulnerable to an asset price correction than would have been the case 15 or 20 years ago,” he told Fortune in an exclusive interview. “What I’d be concerned about is a scenario, because most baby boomers would have a hedged portfolio … [is] if you ended up with something like what we had in 2020 to 2022, where equities were correcting and at the same time, bond yields were rising, so bond prices were falling. That’s the kind of scenario that would, I think, have particular negative impacts on Baby Boomer consumption.”
Doyle said another factor that could clip the wings of boomers is inflation, which has been sticky. That’s because, unlike their salaried counterparts, boomers’ asset returns aren’t tied to inflation and are therefore more susceptible to declines in the real value of their disposable income. “If you’re a boomer and you’re not working anymore, you don’t have that offset to any sort of inflation shock,” he warned. “This could actually start working the other way.”
On the flipside, more than 30 million Americans will turn 65 between now and 2030—an age often associated with retirement. So, while an older population is providing much-needed demand in a sluggish jobs market right now, there will be a significantly smaller workforce to fill the roles when momentum picks up in other sectors down the line.
“The way I frame it in my own mind is demand and supply,” Zandi said. “The aging of the population is supporting demand, and we can see that clearly in the healthcare industry—that’s near term. But, on the supply side, the aging is becoming an increasing headwind to growth, and you can see that in terms of labor supply and also in terms of productivity growth. The demand side effects near term are very positive and necessary in keeping us out of a near-term recession, but [it’s] a very significant supply-side weight on the economy going forward.”
Individuals won’t age overnight, so the reduction in the workforce will be a “corrosion” of growth rather than a cliff edge, he added. But assuming all else is equal, immigration and AI dynamics which could allow the shift to be “much more graceful,” he said.
“Immigration policy [will] very likely will shift at some point in the future, as it becomes clear that we need workers,” Zandi predicted.
Likewise, AI-related productivity gains mean “it could work out OK,” and Doyle agreed. “Some people fear a big shock in unemployment, I’m not necessarily convinced. I think probably what would happen is that jobs growth would move into other areas … it’s much easier to focus on what’s being destroyed because that’s obvious, but it’s a lot harder to see what’s being created. You have to scratch your head and think about how that would occur, and how the economy would come into an equilibrium on that basis.”
