Rising equity prices could be a primary factor behind the recent contraction of the US workforce.
Bank of America concluded that this trend stems from multiple factors affecting the labor force participation rate. While participation has modestly risen lately, it has overall declined over recent years, settling below pre‑pandemic levels according to Bureau of Labor Statistics data.
In September, roughly 62% of Americans were actively engaged in the labor market, about one percentage point lower than pre‑pandemic figures.
The total workforce size slipped to 170 million in September, down from its peak of 171 million in late 2025.
Some analysts suggest that increasing numbers of workers are dropping out of job searches, causing the participation rate to dip and artificially keeping the unemployment rate low.
BofA points to another driver: a surge of retiring boomers and Gen X employees exiting the labor force to rely on wealth accumulated from their stock holdings.
According to the bank, most of the decline in the past six years stems from workers over 55—including the oldest Gen Xers and boomers. In contrast, participation among younger, prime‑age workers has modestly increased.
The team, led by Aditya Bhave, argues that rising equity wealth has made early retirement more feasible, characterizing this trend as a side‑effect of soaring stock prices.
Older investors who have held stocks for decades have reaped substantial gains from a prolonged bull market, with returns accelerating following the AI boom.
Individuals aged 55 and above control most of the nation’s household stock wealth, holding about $51.5 trillion in stocks and mutual funds in Q2, per Fed data. The S&P 500 has risen 140% since the beginning of 2020.
The FIRE (financial independence, retire early) movement has expanded as equity markets keep rising. An Allianz survey this year indicated that 42% of Americans retired earlier than they had planned.
Over a fifth of early retirees cited being financially prepared ahead of schedule, while 21% attributed their early exit to an unexpected job loss.