Working Paper: NBER ID: w27431
Authors: Raj Chetty; John N. Friedman; Michael Stepner; The Opportunity Insights Team
Abstract: We build a publicly available database that tracks economic activity in the U.S. at a granular level in real time using anonymized data from private companies. We report weekly statistics on consumer spending, business revenues, job postings, and employment rates disaggregated by county, sector, and income group. Using the publicly available data, we show how the COVID- 19 pandemic affected the economy by analyzing heterogeneity in its impacts across subgroups. High-income individuals reduced spending sharply in March 2020, particularly in sectors that require in-person interaction. This reduction in spending greatly reduced the revenues of small businesses in affluent, dense areas. Those businesses laid off many of their employees, leading to widespread job losses, especially among low-wage workers in such areas. High-wage workers experienced a “V-shaped” recession that lasted a few weeks, whereas low-wage workers experienced much larger, more persistent job losses. Even though consumer spending and job postings had recovered fully by December 2021, employment rates in low-wage jobs remained lower in areas that were initially hard hit, indicating that the job losses due to the demand shock led to a persistent reduction in labor supply. Building on this diagnostic analysis, we evaluate the impacts of fiscal stimulus policies designed to stem the downward spiral in economic activity. Cash stimulus payments led to sharp increases in spending early in the pandemic, but much smaller responses later in the pandemic, especially for high-income households. Real-time estimates of marginal propensities to consume provided better forecasts of the impacts of subsequent rounds of stimulus payments than historical estimates. Overall, our findings suggest that fiscal policies can stem secondary declines in consumer spending and job losses, but cannot restore full employment when the initial shock to consumer spending arises from health concerns. More broadly, our analysis demonstrates how public statistics constructed from private sector data can support many research and real-time policy analyses, providing a new tool for empirical macroeconomics.
Keywords: COVID-19; Economic Impact; Fiscal Policy; Consumer Spending; Data Analysis
JEL Codes: E0; H0; J0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| reduction in spending (H56) | revenue losses for small businesses (H25) |
| increase in spending among low-income households (D12) | mitigation of declines in consumer spending (D12) |
| high-income households (R20) | smaller response to subsequent stimulus payments (E65) |
| initial shock from health concerns (I19) | persistent reduction in labor supply among low-wage workers (J29) |
| high-income individuals (D31) | reduction in spending (H56) |
| federal stimulus payments (H81) | increase in spending among low-income households (D12) |