Understanding the missing millions

With the labor force participation rate currently one percentage point below February 2020 levels, the Bank of America Institute estimates that more than two million workers should have come back to the labor force but haven’t. Who are they and what has happened to them? We help answer this question with insights gained through analysis of data on Bank of America customers who stopped receiving paychecks during the pandemic.

Given all the possible reasons that have kept people away from the labor force—retirement, health conditions, caregiving responsibilities and migration—it seems unlikely these trends will reverse quickly. As a result, although Fed rate hikes could slow the labor market in the coming months, we think labor supply faces persistent headwinds in the longer run.

Bank of America data corroborates the well-documented view that many of these “missing workers” are older and have likely taken early retirement, especially those with poor health. What is interesting is that prime-age workers (Millennials and Gen X) are exiting the labor force too, specifically lower-income workers in the restaurant and retail sectors.

What is keeping prime age workers away? According to the Bank of America Institute, some of the potential explanations include deteriorating health (both related and unrelated to COVID), caregiving responsibilities and migration to areas with a lower cost of living. Given these challenges are unlikely to be resolved in the near term, we think labor supply could face more persistent headwinds.

Read the full analysis in our report Understanding the missing millions.