Measuring the Labor Market at the Onset of the COVID-19 Crisis

Working Paper: NBER ID: w27613

Authors: Alexander W. Bartik; Marianne Bertrand; Feng Lin; Jesse Rothstein; Matt Unrath

Abstract: We use traditional and non-traditional data to measure the collapse and partial recovery of the U.S. labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence that high UI replacement rates drove job losses or slowed rehiring.

Keywords: COVID-19; Labor Market; Unemployment; Policy Response

JEL Codes: E24; E32; J2; J63

Causal Claims

Cause	Effect
closure of small businesses (N80)	employment decline (J63)
low-wage service sectors (J46)	employment decline (J63)
PPP loans (H81)	milder employment declines (E69)
generous UI benefits (J65)	milder employment declines (E69)
high UI replacement rates (J65)	job losses (J63)
high UI replacement rates (J65)	rehiring (J63)
disadvantaged workers (J79)	layoffs (J63)
disadvantaged workers (J79)	rehiring (J63)
shelter-in-place orders (R28)	job losses (J63)