Hit Harder, Recover Slower? Unequal Employment Effects of the COVID-19 Shock

Abstract

s late as February 2020, the U.S. labor market was booming. The unemployment rate stood at 3.5 percent, a record low since December 1969. COVID-19 struck out of the blue with unprecedented speed and ferocity. U.S. unemployment spiked to 14.7 percent in April 2020, although by October 2020 it had fallen to below 7 percent and has remained below that level to date. Although COVID-19's impact on the labor market has been multifaceted, it broadly materialized through two channels. The first was through the voluntary reduction in consumer and business activities, especially contact-intensive ones, out of fear of infection. The other was through government containment policies, such as various social distancing measures and lockdowns of large swaths of the economy, especially targeted toward jobs categorized as "nonessential."The destructive economic impact of the COVID-19 pandemic was distributed unequally across the population. A worker's gender, race and ethnicity, age, education, industry, and occupation all mattered. We analyze the initial negative effect and its lingering effect through the recovery phase, across demographic and socioeconomic groups. The initial negative impact on employment was larger for women, minorities, the less educated, and the young whether or not we account for the industries and occupations they worked in. By February 2021, however, the differential effects across groups had gotten much smaller overall and had entirely vanished once the different industries and occupations they work in are taken into account. In particular, the differential effects between men and women vanished with or without the industry and occupation compositions taken into account, indicating that women's progress in the labor market over the past decades has not been wiped out by the pandemic. Across race and ethnicity, Hispanics and Asians were the worse hit but made up most of the lost ground, while the initial impact on Blacks was smaller but their recovery was slower. (JEL J21, J15, J16) Federal Reserve Bank of St. Louis Review, Forthcoming 2021.Sang Yoon (Tim) Lee is a reader at Queen Mary University of London. Minsung Park is a Ph.D. candidate at Washington University in St. Louis. Yongseok Shin is a professor of economics at Washington University in St. Louis and a research fellow at the Federal Reserve Bank of St. Louis. We thank Juan Sanchez, Co-Editor-in Chief, and an anonymous referee for several helpful suggestions. We also benefited from our conversations with Alyssa Fowers of the Washington Post. Sang Yoon (Tim) Lee gratefully acknowledges financial support from the British Academy (grant COV19\201483).

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