Key Points

  • The U.S. civilian labor force participation rate for those aged 55 and older fell to 36.9% last month, down from 38.1% a year earlier. RSM US Chief Economist Joe Brusuelas said Monday that this labor market contraction strengthens the business case for AI adoption.
  • The retirement of the so-called "baby boomer" generation is a major driver of the decline in the share of civilians working or seeking work. Brusuelas noted in a report that the share of citizens aged 65 and older has risen from 12% in 2005 to 18% last year.
  • "We are witnessing a historic exit from the U.S. labor market," Brusuelas said. "U.S. businesses will have to turn to technology to replace labor," he added, "which means more AI, not less."

In-Depth Analysis

The decline in the participation rate of older workers may, to some extent, ease concerns that AI demand will fall short ofthe upcoming surge in supply.

According to Gartner's forecast,global AI spending will surge by 47% this year, reaching $2.6 trillion, up from $1.76 trillion in 2025, a scale thatexceeds the GDP of Canada and Australia. By 2030, AI investment will grow another 120% to $5.62 trillion.

"Those worried about whether AI demand will be sufficient might want to reconsider," Brusuelas said.

He also noted that restrictive immigration policies under President Donald Trump have tightened labor supply.

According to White House data, in 2025, the first year of Trump's "immigration crackdown," the U.S. recorded its first negative net migration in at least 50 years.

The Trump administration has deported more than 605,000 undocumented immigrants, while another 1.9 million people voluntarily left the U.S.,the White House said。

"A quarter century ago, when people realized the U.S. economy would face an aging population as baby boomers exited the labor force, economists comforted themselves by thinking Washington would turn to immigration policy to attract high-value-added workers," Brusuelas said. "That turned out not to be the case."

Brusuelas pointed out that strict immigration policies and the trend of workers aged 65 and older exiting the labor force "are having a significant impact on the supply side of the U.S. labor market." He noted that labor supply has contracted by 0.77% over the past year.

He said these two trends are the main factors explaining why the U.S. economy only needs to create about 35,000 jobs per month to maintain labor market stability.

Data released by the U.S. Labor Department on Friday showed that the U.S. economylost 23,000 jobs last month, while May and June employment figures were revised down by a combined 103,000 jobs. The unemployment rate in July fell to 4.1% from 4.2% in June.