Why Grandparents Could Lift the Greenback
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More elderly people are working, and the trend could affect the dollar's direction.
The financial crisis has had tremendous impact on family finances - and on work patterns. We've heard of the "mancession," when more men than women lost their jobs, and now we are seeing something of a "he-covery." But have you noticed what's happened to the elderly?
"Employment to population ratios among older individuals have gone up in recent years, in contrast to the so-called prime-aged 25-54 cohort," says Steven Englander, global head of G10 currency strategy for Citigroup. In other words, your grandparents may be going back to work.
It's hard to know exactly what's behind the trend. The elderly saw their savings decimated in the financial crisis just like everyone else - and they may not have been saving enough to begin with. Then, too, as Englander points out in a note to clients, "older people are healthier than in the past."
Whatever the reason, the shift is likely to have an effect on the dollar,Englander says. If older Americans are spending income rather than savings, the current account balance would likely fall, and for the dollar that's "probably a modest positive rather than a negative."
Then again, "the second conclusion is that this may be another avenue by which QE weakens the USD," Englander says. Because quantitative easing lowers interest rates, people who are reliant on future income payments, from bonds or other investments, can expect that they will hold their value better - and thus they will be more inclined to spend wealth rather than seek new income.
For now, the effect in either direction is likely to be modest, Englander told me: it's a "tendency, yes," he says, but "be careful not to make it the whole story." Still, the workforce shift is a trend worth watching.
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