A second source of labor market tightness is that the labor force participation rate dropped sharply in the pandemic and has only partly recovered. As a result, the labor force remains below its pre-pandemic trend (figure 3). Total demand for labor, measured by total employment plus posted job openings, has substantially recovered and far exceeds the size of the workforce.
About half of the shortfall in labor force participation is attributable to retirements during the pandemic. 1 History suggests that most of those retirees are unlikely to reenter the workforce. But some nonparticipation is due to factors that may fade with time, such as caregiving needs and fear of contracting COVID-19.