The “Great Resignation” was a bit of a media phenomenon during the COVID-19 pandemic. It centered on a highly elevated “quit rate” that indicated workers were leaving jobs in droves. A narrative emerged that a society-wide, work-life rebalancing was underway. But it wasn’t.

The Great Resignation was not the only labor market trend from the pandemic era that was misnamed, misunderstood, or overhyped. Despite the headlines, it also turned out the markets weren’t plagued by millions of “missing jobs,” or a mass and permanent exodus of women from the workforce.

When it comes to the labor markets during the pandemic, things weren’t always what they initially appeared to be.

JAY LINDSAY:

It was dubbed the “Great Resignation,” and it became a bit of a media phenomenon in the middle of the COVID-19 pandemic.

Business reviews reviewed it, pollsters polled about it, and reporters reported on it. But what was it?

Well, it centered on a highly elevated “quit rate” that indicated workers were leaving their jobs in droves.

Coverage of the trend featured stories like the father who’d permanently left a 60-hour a week restaurant job to be with his kids. Or employees dumping a dysfunctional corporate culture.

In some quarters, a narrative emerged that this Great Resignation was, in fact, a radical, society-wide, work-life rebalancing in action. People were resigning – many of them for good.

But that’s not what happened. Here’s University of Maryland economist John Haltiwanger.

JOHN HALTIWANGER:

Yeah, I think actually the term Great Resignation – which had great appeal, right? But it is, unfortunately, misleading. I think a better label, maybe would've been less dramatic, would be the Great Reshuffling.

JAY LINDSAY:

Federal Reserve Bank of Boston economist Dhiren Patki says the high quit rate was mainly about workers moving toward better job opportunities – not better personal balance. They weren’t leaving the workforce, they were finding a new place in it.

DHIREN PATKI:

And, so, this kind of generated a musical chairs of workers looking for new jobs, finding those jobs, and in the process vacating the jobs that they were in, thereby perpetuating the very cycle, this quit and re-employ and quit and re-employ cycle. And so that in a nutshell is both what the Great Resignation is and maybe somewhat more speculative about why it happened.

What didn't happen was workers quitting and going to sit on the couch.

JAY LINDSAY:

The Great Resignation was not the only labor market trend from the pandemic era that was misnamed, misunderstood, or overhyped. Despite the headlines, it also turns out that the pandemic didn’t produce millions of “missing jobs.” Or a mass and permanent exodus of women from the workforce.

When it comes to the labor markets during the pandemic, things weren’t always what they initially appeared to be.

I’m Jay Lindsay, and this is Six Hundred Atlantic, a podcast produced by the Federal Reserve Bank of Boston. This season, we’re following the lead of our Research Department’s most recent economic conference and looking at the pandemic’s impact on labor markets.

That impact initially looked catastrophic, with 20 million jobs lost the month after the COVID-19 lockdowns began.

But just a couple years later, labor markets have returned to close to their pre-pandemic state. And many trends that were bubbling up here and there didn’t end up leaving much of an imprint – or even happening at all.

Boston Fed economist Chris Foote, who organized the conference, says he was skeptical from the start that masses of people were walking away from the workforce or otherwise transforming labor markets.

He says recessions just don’t spark that kind of response in the near-term.

CHRIS FOOTE:

But it's just very difficult, I think, to argue that you're going to see very large changes for people in the prime of their careers in terms of their attachment to the labor force because of a recession. Where you do see those issues is over the longer run.

JAY LINDSAY:

Of course, 20 million jobs lost in a month did get Foote’s attention – and everyone else’s.

But researchers say the fact that hit wasn’t as disastrous as it first appeared is partly because of a rule that generally applies to all recessions: How they end has a lot to do with how they start.

JAY LINDSAY:

Foote uses the economic term “exogenous” to describe the shock to the U.S. economy after the COVID lockdowns. It just means it came from the outside – in this case, the global response to a virus that originated in China.

That’s opposed to “endogenous,” when the shock comes from inside the economy – as it did during the Great Recession.

CHRIS FOOTE:

So, if you go back to the Great Recession of 2007 to 2009, we all remember that there was a large housing bubble before that recession occurred. Housing prices, for lack of a better term, went through the roof. And a bunch of imbalances built up among financial firms, a bunch in the financial system.

JAY LINDSAY:

Those imbalances complicate recovery. But the pre-pandemic economy didn’t really have them.

CHRIS FOOTE:

Before the pandemic, you didn't see those imbalances built up, certainly to the same extent as you did before previous recessions. So, when the acute phase of the pandemic was over, you didn't need to see adjustments.

It was much more of a return to the status quo, which was not an unbalanced status quo.

JAY LINDSAY:

Of course, the response by employers to a shock as massive as what COVID delivered matters as well. And University of Rochester economist Lisa Kahn said their unprecedented willingness to use temporary layoffs was also critical to easing the pandemic shock.

LISA KAHN:

I, at the time, was really worried about all of these people who were on temporary layoff that was preventing them from searching for new jobs because they were hoping to be able to go back to their old jobs. But I thought at the time, “Well, wow, if you're working for a small business like a restaurant, who knows that that restaurant will be there when you're ready to come back?” A company could just decide to move in a new direction because they want to use some different technology, then you know it ... they might not actually call you back. I was really worried for this population. But it turns out that for the most part, those who were on temporary layoffs were recalled back to their same employers or else found jobs very quickly in similar types of fields.

If everybody is going back to their previous positions or to very similar positions, then you're not going to see a lot of changes to the mix of goods and services being produced.

JAY LINDSAY:

But what about those other worrisome labor market trends that made headlines, but didn’t end up making much of a difference?

We’ve already talked about the Great Resignation. Another example discussed at the conference was the millions of, quote, “missing jobs” that some thought the economy may have lost forever.

University of Texas economist Aysegul Sahin noted that, two-and-a-half years after the jobs collapse in April 2020, some projected payroll employment numbers were still about 5.8 million jobs short of their pre-pandemic numbers.

AYSEGUL SAHIN:

This is what I'm going to refer to as the “missing jobs.” These 5.8 million jobs that could have been here if we did not have the pandemic.

JAY LINDSAY:

But Sahin said the projection was driven by a faulty assumption that certain pre-pandemic employment trends would have continued at the same pace throughout the pandemic.

The declining unemployment rate was one of the trends Sahin highlighted. It had fallen to about 3.5 percent before the pandemic, and the calculation of 5.8 million missing jobs assumed it would keep dropping at the same rate.

But Sahin says the rate had bottomed out by March 2020 and couldn’t keep falling at that pace.

In a paper for the conference, Sahin applied more realistic assumptions. The result? Projected payroll employment numbers went back roughly to where they would have been if the pandemic never happened. There weren’t any missing jobs.

AYSEGUL SAHIN:

So, we should be careful in evaluating labor market developments and take into account that the trends that were there before the pandemic started were pushing us into a slower payroll growth and participation growth.

JAY LINDSAY:

Similarly, numbers that at first looked like bad news also drove the concerns about a large exodus of women from the workforce.

One example is related to a gender gap in workforce participation between men and women ages 25-to-54-years old – so called “prime age” workers.

Boston Fed economist Maria Luengo-Prado says that just after the pandemic hit, the gap rose about two percentage points, to about 13 points.

She noted that, just before the pandemic, many women who’d been out of the workforce for while had returned. Now, they looked to be leaving again.

MARIA LUENGO-PRADO:

The worry was that they were never going to come back.

JAY LINDSAY:

But Luengo-Prado said the bump in the gender gap has a simple explanation that has nothing to do with that. It’s because women are much more likely to be employed in so-called “high-contact” professions that require direct, personal interaction with others.

Some examples are teaching and food services – professions that were hit hard by the lockdowns.

MARIA LUENGO-PRADO:

And because of the nature of the pandemic, we know that we had lockdowns, a lot of businesses have to close, more women were working in such businesses, so they lose jobs at higher rates.

JAY LINDSAY:

Luengo-Prado says the gender gap among prime-age workers has since evened out to pre-pandemic levels.

Even some trends that weren’t misread – that really did occur – have already faded in impact. A spike in retirements is one of them.

Wellesley College economist Courtney Coile estimates there were about 400,000 additional retirements during the first two years of the pandemic.

But Coile says that after about two-and-a-half years, the share of people working in a given age group – which is called its employment-to-population ratio – had returned to pre-pandemic levels in all but the oldest group. That’s the group of people aged 70 to 74.

She says that was an indication that early retirements sparked by the pandemic had all but ended.

COURTNEY COILE:

I think that's fair to say that we've moved past this major disruption in terms of retirement. Certainly, this has happened a lot more quickly than anybody would've thought.

JAY LINDSAY:

Coile added that the reasons for the retirement surge are unclear – mainly because many of the hypotheses are hard to test.

She speculates that health concerns and government stimulus payments are two factors that encouraged retirements. And people who lived in places that did less to combat the pandemic or had fewer opportunities for remote work may also have been more likely to head for retirement. But she can’t be certain.

COURTNEY COILE:

What remains a little bit of a puzzle is why exactly retirements increased during the pandemic.

JAY LINDSAY:

Rita Johnson can tell you exactly why she retired – work wasn’t fun anymore.

The 64-year-old had been a hairdresser in Minnesota for 47 years and had no plans to ever stop. But then came the pandemic, a mandated business shutdown, and then a re-opening under conditions Johnson considered onerous.

She couldn’t serve coffee. She couldn’t take more than one person at a time – family members who were together all day, every day would have to wait their turn in an idling car. And every time someone left, she had to sanitize every surface.

RITA JOHNSON:

It wasn't my dream anymore. I wasn't happy doing it because of all the structure, the over-structure. It was very strange.

JAY LINDSAY:

So, in spring 2022, she closed her salon, and she and husband headed for a small town in north Texas. She hasn’t looked back.

RITA JOHNSON:

I love it. I love it. As my sister said, “Rita, what do you think?” And I go, “There's an awful lot of Saturdays in a week.” So, I have six Saturdays and one Sunday. That's kind of how I look at it.

JAY LINDSAY:

While the retirement surge is one pandemic-era trend that has played itself out, there are a few trends that are still developing – and look to have changed labor markets for good. The rise of remote work may be the most important.

Here’s Chris Foote.

CHRIS FOOTE:

You know, I am not a betting man, but if I were to bet, I would say, yeah, it's remote work that people are going to remember. I mean, it's such a big potential shift that people are now experiencing.

When have we ever been able to separate where we live from where we work? And the opportunities that that gives people are truly immense in terms of well-being.

JAY LINDSAY:

But it’s not all upside. For instance, city centers are facing a big blow to their tax bases if they’re no longer a day-to-day destination for significant numbers of workers and their money.

Meanwhile, University of Pennsylvania management professor Peter Cappelli says the increase in remote work nationwide may be shorter-lived and less profound than some think.

That’s because he doubts most employers see it as a long-term benefit for their organizations.

PETER CAPPELLI:

I think that most employers, if they could wave their magic wand, would want people back in the office.

JAY LINDSAY:

That’s next time, on Six Hundred Atlantic.

Thank you for listening to Season Four of Six Hundred Atlantic. You can find interviews and our first four seasons and subscribe to our mailing list at bostonfed.org/six-hundred-atlantic. And we'd really appreciate it if you would rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app.

The producers would like to thank our contributors for their time and insights. They are Peter Cappelli, Courtney Coile, Chris Foote, John Haltiwanger, Rita Johnson, Lisa Kahn, Maria Luengo-Prado, and Dhiren Patki.

This has been “From Collapse to Recovery,” the fourth season of the Boston Fed’s Six Hundred Atlantic podcast.