Another thing to blame boomers for: inflation

• Boomers are reaching retirement age in the US.
• It comes while over a million people are missing from the US workforce, a BlackRock study found.

Millennials are already blaming baby boomers for the starter-home shortage. Now younger Americans may have a new reason to scrutinize their elders' impact on the economy.

Since early 2020, at least 1.3 million retirement-age adults departed from the workforce, a new study the investment-management firm BlackRock found. That figure is growing steadily: between 2008 and 2019, members of the retired population aged 55 and older grew by about 1 million per year, and between 2019 and 2021, the number of retirees aged 55 and older has grown by 3.5 million, according to Pew Research Center.

It's contributing to the shortage of workers in America, which has forced companies to pay more to attract talent. That's also one reason companies use to justify raising prices as inflation still remains high, even as it improves slightly. Inflation rose 7.7% year-over-year in October, a decline from 8.2% in September. As the Fed tries to tone down price increases, retirement is proving to be an obstacle for them — it's not boomers' fault for retiring; it's simply the reality of America's changing demographics.

"An aging population will hurt the US economy's ability to grow without creating inflation longer term," the BlackRock study said, adding that the number of people retiring makes "it hard for the economy to operate at current activity levels without fueling inflation."

That means the Fed has to bring inflation down by reducing demand via the higher interest rates, signaling a harsher economic downturn than the US could have had.

The labor shortage is here to stay, and it's not a good sign for inflation

Several workforce factors are complicating things for the Fed.

The share of the American population that is working or seeking a job is still below pre-COVID levels, a shortfall that the BlackRock report said the economy can't recover from anytime soon. The pandemic has taken 1.3 million people out of the workforce as of October, the researchers estimated. A wave of retirements means that the cost of labor is getting more expensive for companies, and they're raising prices on goods to make up for it. Trump-era immigration policies and a declining birth rate are also thinning out the number of working Americans.

Gen Xers aged 55 to 64 are one of the few groups working at their pre-pandemic employment rate, according to Labor Department data.

Plenty of older Americans are still working, though — in fact, more of them are working into their 80s, thanks to medical advancements, but also because the cost of retirement is just too high for many.

Before the pandemic, the number of octogenarians in the workforce hit its peak: a Washington Post analysis using data from the Bureau of Labor Statistics shows that the number of working adults in their 80s reached a high in 2019, with roughly 734,000 octogenarians in the US workforce that year compared to roughly 110,000 in 1980.

Labor activists and politicians have argued that workers can enjoy their current rare bargaining power and wage gains without it leading to inflation-inducing price hikes — but companies would have to be willing to cut into their own profits.

Evidence shows they largely haven't been willing to make that compromise. Corporate profits are soaring the most since 1950, with many companies clocking record profits over the past year, such as those in the oil-and-gas industry.

And by extension, lowering the cost of goods and cutting corporate profits should ease the sting of the retirement wave as well.

"Companies have passed higher costs on to customers. But they have also taken advantage of circumstances to expand profit margins," Paul Donovan, the chief economist at UBS, said last month.

BlackRock predicted that the Fed rate hikes will push the US economy into a recession, as 2023 seems poised for one, according to other economists.

But this demographic shift workers of any age propel "won't reverse without massive structural changes in workforce behavior over time," the BlackRock study said. "Demographic trends also suggest the labor pool will expand much more slowly in the next 20 years than it did in the past 20."

People are overestimating how much inflation will come down in the near term, the BlackRock study said, and they're underestimating the impact of a coming recession and earnings slowdown. Because it predicts inflation will last a while amid a recession, the study recommends, for the short-term, investing in inflation-linked bonds, and says that pursuing treasuries and US stocks is a bad idea. In the long-term, however, the BlackRock study says stocks will be a good investment.

"Long term, we're overweight equities and think stocks' overall return will surpass fixed income," the study said.