The authors focus on three key variables: the employment-to-population ratio, the unemployment rate, and the labor force participation rate. Historically, the employment-to-population ratio and the unemployment rate are near reverse images of one another during recessions, as workers move out of employment and into unemployment. More severe recessions also sometimes lead to a phenomenon of “discouraged workers,” in which some unemployed workers stop looking for work. These workers are reclassified as “out of the labor force” by Bureau of Labor Statistics (BLS) definitions, so the unemployment rate can decline along with the labor force participation rate while the employment-to-population ratio shows little recovery.

The authors figures, based on survey data from Coibion et al. (2020), document the following three facts. First, the employment-to-population ratio has declined sharply from 60% down to 52.2% (Panel B). This decline in employment is equivalent to 20 million people losing their jobs and is larger than the entire decline in the employment to population ratio experienced during the Great Recession. Second, the unemployment rate rose from 4.2% to 6.3% (Panel A). While this increase is the single biggest discrete jump in unemployment over the last 15 years, this change in unemployment corresponds only to about one-third of the increase observed during the Great Recession. For comparison with the employment-to-population ratio, if all twenty million newly unemployed people were counted in the unemployment rate, there would have been an increase in the unemployment rate from 4.2% to 16.4%, the highest level since 1939. Third, the reason for the discrepancy between the two is that many of the newly non-employed people are reporting that they are not actively looking for work, so they do not count as unemployed but rather as exiting the labor force. The labor force participation rate dropped from 64.2% to 56.8% (Panel C). Our survey evidence suggests that 6 percentage points of the decline and, hence, almost the entire decrease can be explained by people moving out of the labor force into retirement.