Bank Of America: The US Unemployment Rate Is Falling Because Americans Are Too Rich

Last Friday’s dismal jobs report (where 23K jobs were lost) had a silver lining: the unemployment rate dropped to 4.1%, the lowest since June 2025, dinging expectations that the AI revolution would lead to a spike in unemployment. There was just one problem: unemployment dropped not because more people found a job, but because the labor force shrank by a whopping 264K, and down more than 2 million since the start of the year.

To be sure, the continued shrinkage of the US labor is hardly new and has long been attributed to Trump’s anti illegal immigration policies which have led to a substantial trimming of the US labor force. 

However, in a novel spin this morning, Bank of America – seemingly convinced that the US is now enjoying a new Golden Age – published a report titled “A stock-fueled retirement party” in which it makes the modest proposal that the US unemployment rate is shrinking because Americans are simply too rich. 

That’s right: according to BofA economist Stephen Juneau (full note available here), the labor force participation rate among older (55+) workers never recovered after the pandemic shock. It remained roughly range-bound until the summer of 2024, but has taken another big leg down since then.

Why? Well, to BofA, this is related to the 35%+ increase in the S&P 500 over the last two years. The resulting surge in wealth has likely made retirement an easier choice for many.

More broadly as well, the economist notes that there appears to be a modest negative relationship between equity gains and older workers’ participation.

Is BofA right? We don’t know, but if they are it would be ironic that while we wait for the unemployment rate explosion as a result of chatbot agents taking millions of white collar data-heavy jobs, the unemployment rate would actually drop thanks to all those who were long AI stocks.