Recessions and Retirement: New Evidence from the COVID-19 Pandemic

The COVID-19 pandemic disrupted the US labor market, leading to an unprecedented loss of 22 million jobs in March and April 2020. Evidence from past recessions indicates that economic downturns are typically associated with an increase in retirements. In this study, we revisit the relationship between recessions and retirement in the COVID-19 era, using data from the Current Population Survey (CPS) supplemented by other data on economic and COVID conditions. We find that higher unemployment is associated with an increase in the probability of transitioning from employment to being out of the labor force during the pre-pandemic period, consistent with previous studies. Surprisingly, however, retirement transitions during the pandemic have been insensitive to local labor market conditions. Our finding that the probability of retirement increased during the pandemic but that retirements are largely unrelated to local economic or COVID conditions points to a potential role for common national factors such as generalized health concerns, government policies, or stock market gains.