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How Did COVID Change the U.S. Labor Market?

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This is an excerpt from our most recent Economic Outlook report. To access the full PDF, please click here.

I don’t need to inform any sophisticated reader of this January 2023 Zacks economics publication.

There is a record low 3.5% household U.S. Unemployment Rate showing up in current U.S. macro-economic data.

Nonetheless, I start this special Zacks economics section showing you the 30-year timeline.

This is an impressive macro feat...

Zacks Investment Research
Image Source: Zacks Investment Research

Complementing that U.S. labor market strength, and confirming this U.S. job market tightness? Continuing U.S. weekly claims for insured unemployment track at multi-decade lows too.

Confirm this in the FRED chart below. Grey areas mark the last eight U.S. recessions.

Zacks Investment Research
Image Source: Zacks Investment Research

So, the big U.S. (and likely global) macro question has arrived this month.

What in fact, did happen to the U.S. labor markets during the pre- and post-COVID era?

That key question can be answered definitively. Now.

After the recent publication of some excellent Federal Reserve economic research. Read on.

The Great Retirement Boom

In “'The Great Retirement Boom: The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation," three Federal Reserve Board economists made the following recent data discoveries --


“As of October 2022, the retired share of the U.S. population was nearly 1½ percentage points above its pre-pandemic level (after adjusting for updated population controls to the Current Population Survey), accounting for nearly all of the shortfall in the labor force participation rate.”

“We show that: more than half of the increase in the retired share are ‘excess retirements’ that would likely not have occurred in the absence of the pandemic:

  • Excess retirements have been concentrated among cohorts age 65 and older at the start of the pandemic
  • Excess retirements have been largest among the college-educated and whites
  • Excess retirements reflect in part that worker transitions from the labor force to retirement remain elevated

“We also show that failing to account for updated population controls to the Current Population Survey leads to an underestimate of the rise in the retired share over the last few years.

“We use a cohort-based framework to argue that looking forward, unless the pandemic has permanently affected retirement behavior, excess retirements should eventually fade as those who retired early during the pandemic reach ages when they would have normally retired.

“Even as excess retirements fade, the retired share will remain well above its pre-pandemic level, reflecting population aging."

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