Makin' Money

Social Security and the job outlook

Chris Farrell Apr 10, 2012

I’m skeptical that the employment situation is as bad as the weak numbers suggested in Friday’s employment report. Economist Ed Yardeni notes that the 3-month average gain of payroll employment remains solid. For example, payrolls rose 211,700 per month on average during the first quarter of 2012 vs. 164,000 during the fourth quarter of last year and 127,700 during the third quarter of 2011.

There’s another potential bright spot to emphasize about the economy: Social Security claims came down last year. It’s a sign that older workers may be feeling better about their job prospects.

Social Security retirement awards hit an all-time high in 2009, when 3.2 million Americans age 62 and older began collecting. Between 2007 and 2009, retirement awards increased 25 percent, according to Richard Johnson, economist at the Urban Institute. The increase partly reflected aging baby boomers turning 62. More importantly, older Americans were more likely to claim Social Security retirement benefits because of the bad economy and weak labor market.

“High unemployment generally increases the share of adults age 62 and older who claim Social Security because it provides crucial income support for those who can’t find work,” says Johnson in Social Security Claims Edged Down in 2011.

Social Security is a paycheck for those who are eligible and can’t find a job. Yet it’s a financial mistake to take Social Security early since it’s a reduced benefit. For example, Social Security reduces monthly payments by 25 percent when beneficiaries begin collecting at age 62 instead of 66.

Social Security claims are down. So is the retirement benefit take-up rate. The rate is defined as the number of new retirement awards in the year divided by the number of adults age 62 and older who have not yet begun collecting benefits at the start of the year.

As you can see from the chart, it reached 30.8 percent in 2009 and it has declined since then to 26.9 percent in 2011. The retirement benefit take-up rate was lower in 2011 than any year since 1976. It looks like the trend toward delaying taking Social Security, which began around 2000, has resumed. That said, disability benefits are still extremely high after soaring to a record in 2010.

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