With the overall unemployment rate hovering at 9.5%, many older workers have now found themselves at the back of the line to return to the work force. "Many employers seem to think it is not worth their time or effort to train me in a position," says Kathleen McCabe, 59, a former apartment manager in Tulsa, Okla., who has been out of work since April 2009. "They assume I will leave for retirement soon."
The diminishing work prospects will require many older folks to make do with less-a discouraging outlook for firms hoping to sell them everything from restaurant meals to cars.
As of 2008, the latest data available, people aged 65 to 74 were spending 12.3% less than they did ten years earlier, in inflation-adjusted terms.
The impact isn't limited to people on the verge of retiring. Younger people, too, will have to reduce consumption now to save enough money to get by in retirement. That's one reason Richard Berner, chief U.S. economist at Morgan Stanley in New York, estimates that even after the economy recovers, consumer spending will grow at an annual, inflation-adjusted rate of about 2% to 2.5% in the long term, compared to an average of 3.6% in the ten years leading up to the last recession.
Policy makers have more immediate concerns, such as how to create jobs for the nearly 15 million unemployed. The predicament of retirees, though, demonstrates how policy decisions'for example, on whether to stimulate the economy through interest rates or government spending-can have repercussions for many years to come.
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