The decline in labor force participation due to the pandemic

The U.S. labor market experienced significant changes during the early stages of the pandemic, including remote work, temporary employment declines, and reduced labor force participation. The latter, a decline in the proportion of workers in the labor force, has remained persistently below pre-pandemic levels. This decline, affecting nearly 1% of adults, has important implications for economic growth, inflation, and labor market policies. Demographic changes, such as the retirement of baby boomers, explain some of this decline, but there is still a significant number of missing workers. These missing workers are individuals who have exited the labor force or are working fewer hours than expected. Two major factors contributing to this are long COVID, which includes cognitive and mental health declines, and fear of contracting COVID. Long COVID is estimated to account for around 700,000 missing workers, while fear of COVID is estimated to contribute to around 790,000 missing workers. Together, these factors explain the shortfall in labor force participation.