KDI 경제정보센터

The labor force is defined as the people who currently hold a job or are actively seeking a job. A person who is not employed and also is not looking to become employed isn’t considered part of the labor force.

When the pandemic hit in early 2020, businesses closed. A larger-than-usual portion of the labor force was suddenly without work. Some got other jobs, some kept looking, but millions left the labor force. This departure had a multitude of causes, such as early retirement, self-isolation due to the pandemic, taking care of loved ones, or frustration with an unsuccessful job search and continued access to increased federal unemployment benefits.

The FRED graph above shows that the number of people outside the labor force spiked in the spring of 2020. That number declined, as more workers re-entered the labor force over the next year, but the number is still well above what it was before the pandemic.

The red line in the graph is the 5-year trend line from January 2015 to January 2020, which we extended to the current time: More people are still outside the labor force than we would have expected, based on the trend leading up to the pandemic. In fact, there are 2.2 million more people outside the labor force than was expected, which can help explain the current tightness in the labor force.