Labor Force Participation: Where Have All the Workers Gone?

By Curt Long, NAFCU Chief Economist and Vice President of Research

Curt Long, NAFCU Chief Economist and Vice President of Research

If you talk to any CEO about their organization’s biggest challenges, it will not take long before hiring and retention come up. A recent survey of small businesses found that labor quality and availability was their single biggest problem, outpacing sales and taxes.1 In a November 2022 speech, Federal Reserve Chair Jerome Powell observed that the outage in the labor force versus the pre-COVID forecast stood at 3.5 million.2  This note considers the reasons behind that outage as well as the outlook for future labor force growth.

The lion’s share of the blame for the drop in the labor force falls on the surge in retirements. Figure 1 illustrates both the secular upward trend in the retiree share of the adult population as a result of societal aging, as well as the historic leap in retirements beginning in 2020. Even as COVID fears have abated somewhat, excess retirements have not meaningfully declined. A recent study from Federal Reserve researchers attributes essentially all of the one-percentage point decline in the labor force participation rate between 2019 and 2022 to retirees.3

On a more somber note, it may be that COVID-related deaths are reducing the labor force. To date, COVID-related deaths have been predominantly among older populations who generally have lower rates of labor force participation. However, Chair Powell’s November speech cited research estimating that 400,000 workers have died from COVID.

It appears that a couple of developments that suppressed labor supply during the early parts of the pandemic are now in retreat. From 2015–19, the number of foreign-born individuals in the labor force increased by an average of 530,000 annually. COVID restrictions both domestically and abroad resulted in a drop of nearly 1.1 million in 2020. However, 2022 was a banner year for legal immigration as the number of foreign-born workers grew by 1.8 million.

Similarly, many workers who were separated from their jobs in 2020 started their own businesses. Relative to pre-pandemic levels, the increase in the number of self-employed individuals in nonagricultural businesses peaked in mid-2021 at roughly 800,000. However, that figure has since declined to roughly 200,000.

Each year, the Bureau of Labor Statistics (BLS) issues estimates for labor force growth over the next decade. The most recent forecast indicates that the BLS expects the immigration-induced labor force surge of 2022 to be an outlier. In each year from 2023 through the end of the forecast, annual growth in the labor force is expected to fall short of the annual average from the prior decade, and well short of the average from the aughts. If this forecast bears out, the struggle to fill job vacancies is likely to continue. A key competency for businesses in the 2020s will be attracting and retaining talent, but also increasing productivity so that they get the most out of their employees. 


  1. National Federation of Independent Businesses, “Economic Trends” (Dec. 2022). Note that the survey has been kept since 1986. Labor quality has been the top-rated problem since 2018, when it assumed the position for the first time in the survey’s history.
  2. Chair Jerome Powell, “Inflation and the Labor Market” (Nov. 30, 2022), speech delivered at Hutchins Center on Fiscal and Monetary Policy, Brookings Institution, Washington, D.C.
  3. Montes, Joshua, Christopher Smith, and Juliana Dajon. 2022. “The Great Retirement Boom: The Pandemic-Era Surge in Retirements and Implications for Future Labor Force Participation.” DOI: