This paper provides evidence on the micro-level dynamics underlying the process of labor market polarization (disappearance of middle-wage jobs with a high content of routine tasks). We use matched data from the monthly Current Population Survey from 1976 to 2012 to study the transitions of individuals across occupations and employment states during different phases of the business cycle. This allows us to determine the extent to which the aggregate fall in routine employment per capita is due to changes in occupational mobility patterns, changes in the patterns of labor force exit for workers previously in routine employment, or changes in the occupational choices of labor force entrants. We find that there has been a significant fall in the rate at which unemployed routine workers (both manual and cognitive) find jobs in their previous occupation group. This fall in the return job finding rate is not observed for unemployed non-routine workers. We also find an increase in the rate at which employed and unemployed routine manual workers leave the labor force, particularly during recovery phases (12 months following the end of a recession). There is no similar change in labor force exit rates for workers in any of the other occupation groups. There has also been a fall in the entry rate from inactivity towards routine manual employment. These changes in switching rates cannot be explained by demographic composition shifts; they are due to changes in transition propensities observed across all demographic groups.