I could not find a precise definition of what the graph shows, but that's a graph of participation rate and not absolute numbers. I.e., of all the people who are alive at a certain time, what percentage are neither employed nor unemployed (where "unemployed" implies "looking for a job"). To confuse things even more, the whole percentage is normalized to Mar 2020=100.

Your estimate of the mortality in that cohort is likely off by an order of magnitude or more. I can't find an exact figure, so here is a back of the envelope estimate. https://euromomo.eu/graphs-and-maps/ tells me that about 30,000 more people of age 45-64 died in 2020 in excess of a typical year. For the purpose of estimation, I assume as a worst case that they all were 55+ and that the number of 65+ people working is not too large. How many 55-64 people exist in Europe? The euromomo graph refers to a region of about 400M people. For the purpose of this estimation, assume that people live 100 years and that age distribution is uniform, so maybe 40M are in that age range. Thus, the extra mortality in 2020 would be less than 0.1%. You can criticize this analysis in many ways, but it's hard to believe that I am off by more than a factor of 5 in either direction. Thus, I don't see how "dead by covid" can possibly justify a 5% decrease in participation rate.