Covid-19 Recovery’s Lagging Indicators: Unemployment and Workers’ Participation in the Economy

March 18, 2021

Is the recovery just around the corner? 2020 was a devastating year. The US economy slid from “business as usual” to a severe lockdown within a matter of days last March. Analysts1 now disagree on when the US economy will have a strong economic recovery, or whether some lagging indicators2 may derail this process. One of the most often quoted indicators are linked to jobs and the social impact of high unemployment rates in the economy. This piece will examine that impact, with a clear focus on workers’ participation in the economy, as unemployment rates sometimes hide the full impact of the crisis on the job market.

Unemployment rates are the traditional and most common way to measure the impact of workers left unemployed. It is a percentage of all workers looking for jobs, and that data is compiled by the US Bureau of Labor3. Unemployment rates jumped last February from 3.5% to 14.4% last April. Yet, this sudden growth in unemployment rate quickly returned to the mean: Current rates are at 6.2%, a regression to the mean from its previous peak. See the chart below:

Source: Bureau of Labor Statistics, Current Population Survey, Seasonally Adjusted

Are we there yet? As one can see in the chart above, the jump in unemployment in February of 2020 (in red) regressed to the mean (in green) for the most part. This sharp decline (14.4% to 6.2%) in unemployment exceeded market expectations4. Yet there is some economic slack hidden in that decline. CNBC estimates that 4.3 million5 Americans decided to exit the labor force. This piece will run its own analysis to check this figure with US DOL data. The Federal Reserve Chair Jay Powell6 stated that “fear of the virus and the disappearance of employment opportunities in the sectors most affected by it” were the main causes for this labor market slack.

Getting these jobs back – This slack plummeted the adult participation rate from 61.1% to 51.3% from February to March 2020. This decline in participation can be further divided into full-time and part-time workers’ employment: (i) part-time work dried up 39%, from 26.6 million to 19.1 million; whereas (ii) there were 16.4 million less full-time jobs, from 130.7 million to 114.3 million positions, or a 14.3% percent absolute decline; (iii) the combined total volume of jobs gone amounts to 23.9 million. The red circle in the graph below shows the job losses:

Source: Bureau of Labor Statistics, Current Population Survey, Seasonally Adjusted

Estimating the job market slack – Of these workers left out of the market (in the red circle in the chart above), 10.6 million full-time and 6 million part-time workers were already back by February 2021. From the 23.9 million that initially left, there were still 7.3 million out of work. Unemployment figures track workers actively looking for jobs: there are 3.7 million additional people looking for full-time jobs, and 600 thousand looking for part-time jobs. This means that 4.3 million are in the unemployment estimates. But there are still 3 million people out of work but not actively looking for jobs. This is similar to the 4 million figure presented above by CNBC.

Who’s in and who’s out? These 3 to 4 million workers include7 both early retirees and people who have lost hope in the current pandemic. The hope is that with vaccinations weakening the pandemic and with the stimulus package strengthening families’ finances, there should be a rise in workforce participation. Yet there is still a lingering fear that these workers may never take part in the economy again. Economist Michael Pearce from Capital Economics points out the importance of these workers rejoining the workforce: “Whether or not the recent dropouts re-enter the workforce — as they eventually did after the 2008 global financial crisis — is key to how much economic slack remains in the labor market.” The chart below shows a comparison between the 2008 crisis and the current Covid-19 one:

Source: Bureau of Labor Statistics, Current Population Survey, Seasonally Adjusted

Steep – As one can see on the chart above, there was a severe decline in employment in 2020. That decline is smaller than the one during the 2008 crisis. Though while less severe, it is still of historical proportions: to put it in perspective, the 2001 bubble and the 1991 crisis saw rates hovering around -1.5% to 0.9%. Both 2008 and 2020 are out of proportion in terms of job losses. The next graph will compare the 2008 crisis recovery in jobs growth with the current crisis:

Source: Bureau of Labor Statistics, Current Population Survey, Seasonally Adjusted

2008 – As one can see from the graph above, the slope of the 2008 crisis is less steep than the current one, which means that it took longer to recover from the 2008 crisis. There were 121.4 million workers active in February 2008. After 24 months, that number declined to 110.6 million. It took 87 months for the economy to recover these 10.8 million jobs.

Forecasting –In order to see whether the current crisis will last as long as the 2008 crisis did (87 months), one should examine monthly data for worker participation. The chart below shows worker participation on a monthly basis, with 2019 as the base year in blue, 2020 as the crisis year in red and the beginning of 2021 in gray, showing where the job market stands:

Source: Bureau of Labor Statistics, Current Population Survey, Seasonally Adjusted

Steep recovery in jobs – As one can see on the graph above, the job reduction during lockdown was steep, but the recovery was fast. This confirms the previous chart’s impression: the second calendar year of this crisis (2021) starts from a much higher position. On the other hand, during the 2008 crisis, the economy was still shedding jobs in 2009. As late as 2012, the US economy had only recovered a third of the jobs lost. Yet, this 2020 crisis was more sudden, erasing more jobs in a single month than ever before.

Covid-19 winners: With so many job losses, it is hard to imagine there are any winners of the pandemic. The retail sector through e-commerce became stronger, even though growth is not spread out equally across business lines. In fact, retail itself is a very concentrated business in the US:8 68% of e-commerce is concentrated in only 10 retailers. Amazon is responsible for more than half of all online sales. A sector analyst9 pointed out that “the big just got bigger,” as the benefits of online selling have eluded smaller businesses, especially those that have not developed their online platform before the pandemic.

Retail e-commerce sales in the United States from 2017 to 2024 (in million U.S. dollars)

Source: Statista

Winner takes all: The pandemic forced many small businesses to start selling online. Those that could not afford to develop their own end-to-end platforms were directed to existing online marketplaces. Shopify, a Canadian company that specializes in helping small businesses jumpstart their own online stores saw 90% revenue growth in 2020. Currently, the platform serves 1.7 million merchants globally. Conversely, large retailers that already had strong e-commerce platforms built before the pandemic are better placed to retain and gain customers. Brian Cornell10, Target CEO, explained that “Throughout this crisis, we have deepened our relationship with American consumers and introduced millions to our digital fulfillment services.”  The company saw an 84% increase11 in its 2020 second quarter operating revenue.

Tech Power. Tech companies were also major beneficiaries of the pandemic. As the pandemic spread, people had to find substitutes for the in-person activities they had used to attend. Online classes became routine for many students worldwide. A great example for peak growth during the pandemic is the conference platform Zoom. Before 2020 the company had an average of 10 million daily video calls participants. After 2020, it is projected that the platform will host 3 trillion meeting minutes for participants. The company CEO, Eric Yuan, believed that the rise in activity on the platform is going to maintain itself after the pandemic. At the 2020 Web Summit, Yuan said: “Let’s say the pandemic is over tomorrow. Do we all go back to the office? I don’t think every employee will go back to the office. It’s very likely we’ll end up with a hybrid. Because it’s good for climate change and it’s good for productivity. That’s why I think a tool like Zoom will stay.”12

Winner and losers – In conclusion, it is clear that the economy has shed a large number of jobs. While the recovery seems to be almost as aggressive as the initial downfall, there are still 3 to 4 million workers who have been left out of the job market. The recovery from the 2008 crisis appeared much slower than the current one is expected to be. More jobs have been shed in March 2020 than any other single month in history, but many of these jobs have already been recovered. While it is unclear whether the crisis is over, it seems like the job market is coming to a good place. Once again, tech companies (especially the larger ones) have been the unequivocal winners of the 2020 crisis. Workers that were left behind will likely either wait for the lockdown to end in order to return to their industries, retire, or train to adjust to this new job market. While every crisis is complicated, it seems like the job market has turned the corner in this one.

Bernardo Weaver is a senior finance consultant at the World Bank Group in Washington DC and a finance professor to top investment banks and Hedge Funds in Wall Street. Mr. Weaver also teaches M&A as an adjunct professor at Georgetown McDonough School of Business and at Pepperdine University Graziadio School of Business. Mr. Weaver is a Wharton MBA grad, and holds an LLM from UConn Law, and a law degree from P.U.C.- Rio, in Brazil.


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1 Caldwell, Preston. “When Will the U.S. Economy Recover?” Morningstar, Inc., February 24, 2021.

2 Bloomberg. Accessed March 16, 2021.

3 All graphs and data used in this article comes from primary source at the DOL

“U.S. Economic Watch: Unemployment Rate Drops to 8.4%, Exceeding Expectations.” CBREUS. Accessed March 16, 2021.

Iacurci, Greg. “The Pandemic Pushes Millions from the Labor Force. That’s Bad News.” CNBC. CNBC, February 8, 2021.

Politi, J. (2021, March 04). US policymakers lose faith in official unemployment rate. Retrieved March 11, 2021, from

7 Id. 2

Haimerl, A. (2021, March 07). When you’re a small business, e-commerce is tougher than it looks. Retrieved March 11, 2021, from

Liu, Cindy. “The Haves and Have-Nots: Divides Deepen across Retail amid the Pandemic.” Insider Intelligence. Insider Intelligence, December 28, 2020.

10 Haimerl, A. (2021, March 07). When you’re a small business, e-commerce is tougher than it looks. Retrieved March 13, 2021, from

11 Target corporation reports second quarter earnings. (2020, August 19). Retrieved March 12, 2021, from,compared%20with%20%241.82%20in%202019.

12 Web Summit: Founder and CEO of zoom, ERIC yuan believes the way we work has changed forever. (n.d.). Retrieved March 13, 2021, from


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