A new report indicates that some Americans who have been laid off during the coronavirus pandemic won't be returning to work, and might be ready for retirement.
New economic research featured in a MarketWatch article suggests that many of the then-20 million unemployed Americans are now not actively looking for new jobs, prompting a new wave of early retirement.
The paper writes that in more severe recessions, a phenomenon known as “discouraged workers,” where some unemployed workers stop looking for work, can occur.
Authored by Olivier Coibion from the University of Texas at Austin, Yuriy Gorodnichenko from the University of California, Berkley, and Michael Weber from the University of Chicago, the study uses data from the Bureau of Labor Statistics and surveys of the Nielsen Homescan panel to gauge a preliminary response of labor markets to the coronavirus.
Data from these sources find an "enormous" decline in employment relative to other periods of economic recession in the U.S., yet a smaller increase in the unemployment rate, by about 2 percentage points. The current unemployment rate rose from about 4.2 percent before the crisis to 6.3 percent during the coronavirus recession.
If all previously 20 million unemployed Americans are taken into account, this unemployment rate would read closer to 16.4 percent, per the report.
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The major point here is that the unemployment rate also consists of people who are actively looking for new work. This study proposes that the unemployment rate is disproportionate from the amount of Americans currently out of work due to many of those unemployed Americans dropping out of the labor force.
Data collected from surveys that ask respondents why they were unemployed and not actively looking for a job showed that only 1.6 percent said they simply could not find a new job.
Many more respondents, however, indicate that they are retired.
"We see a large increase in those who claim to be retired, going from 53% to 60%," the authors wrote. "This makes early retirement a major force in accounting for the decline in the labor-force participation."
MarketWatch reporters contacted Weber via email, where he explained the numbers were preliminary.
He also noted, however, that "based on past experience, the longer the situation continues, the more severe the issue of discouraged workers and early retirements."
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