The people who “drop out” of the labor market (not working and don’t collect unemployment) basically are not counted. They are not considered part of the labor force. I know people who get burned out and live off their savings for long periods of time.
Interestingly, even though the labor participation rate hasn't returned to pre-covid levels, total civilian labor force levels have: https://fred.stlouisfed.org/series/CLF16OV#0
