The labor force participation rate1 registered its largest drop on record in 2020, falling from 63.2 percent in the fourth quarter of 2019 to 60.8 percent in the second quarter of 2020.2 By the second quarter of 2021, the rate had recovered slightly, to 61.6 percent, but was still 1.6 percentage points below its pre-pandemic level—indicating that as of that quarter, roughly 5.25 million people had left the labor force.
People left the labor force during 2020 for many reasons. Some may have left due to cyclical factors: Labor force participation tends to fall when the unemployment rate is high, and in 2020 the COVID-19 crisis featured the highest post-Great Depression unemployment rate on record (14.8 percent in April 2020).3 Others may have left for factors specific to the COVID-19 crisis. For example, many people were forced to quit jobs to care for children or other family members because of the lockdown of schools and other institutions. Some people would have left the labor force anyway because of retirement. Retirees are a significant fraction of the population, as U.S. population growth has slowed and Baby Boomers (those born between 1946 through 1964) are currently retiring. Finally, a significant number of people who had not planned to retire in 2020 may have retired anyway because of the dangers to their health or due to rising asset values that made retirement feasible. This essay provides a back-of-the-envelope estimate of the number of “COVID-19 retirements.”
The figure shows that the percentage of retirees in the U.S. population (the blue line) was relatively stable at around 15.5 percent until 2008 (the vertical dashed line). That year marked not only the beginning of the Great Financial Crisis but also when the oldest Baby Boomers, those born in 1946, turned 62 years of age and became eligible to receive Social Security retirement benefits. As Baby Boomers began retiring, the percentage of retirees in the U.S. population grew to 18.3 percent in February 2020, the eve of the COVID-19 outbreak. The percentage then increased at a much faster rate, reaching 19.3 percent in August 2021.
One simple way to disentangle “normal” retirements from excess retirements due to COVID-19 is to compare the predicted percentage of Baby Boomer retirements from 2008 to February 2020 (the red dashed line in the figure) with the actual percentage of all retirements. The 0.92 percent difference between the two can be interpreted as the excess retirements. Based on that number, as of August 2021, there were slightly over 3 million excess retirements due to COVID-19, which is more than half of the 5.25 million people who left the labor force from the beginning of the pandemic to the second quarter of 2021.4
Chosen excerpts by Job Market Monitor. Read the whole story @ The COVID Retirement Boom | St. Louis Fed