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What the Past Won’t Tell Us About the Pandemic “Recession”

May 19, 2020

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As odd as it sounds, the sudden impact of COVID-19 had me digging out my economics textbooks. Even as an economist, this situation has me a bit perplexed, so I went in search of similar events from the past. But I didn’t find the answers I was looking for.

Early on, it has become clear that the magnitude and speed of job loss are greater than any recession we’ve experienced in modern U.S. history. In the first month alone, U.S. employment fell a staggering 22%. By comparison, the Great Depression saw a cumulative employment decline of 12%, which no other recession has exceeded until now. And, in every recession since the 1940s, peak decline occurred between 1 and 2.5 years after the onset of the recession, yet we’ve already reached 22% in just one month.

The million-dollar question on most people’s minds is how much of this job loss will come back?

In a recently published working paper on “The U.S. Labor Market During the Beginning of the Pandemic Recession”, we measured the decline of jobs in the U.S. labor market during the initial months of the “recession,” looking at the differences between paid and active employment. Paid employees are those workers who are paid during a given pay period versus employees who are simply active on company payrolls but do not necessarily receive a paycheck. By comparing the differences in paid and active employment, we can infer the number of workers on temporary layoffs, and therefore, the potential for job return.

The 22% decline in U.S. employment from mid-February through mid-April represents paid employment. In contrast, the decline of active employment was about 14%. That difference amounts to about 10 to 11 million workers. We can reasonably surmise that’s the approximate number of workers that businesses are placing on temporary layoffs with the intent to return them to work. Of course, what we don’t know, and cannot predict, is to what degree those businesses will reopen and those workers will return.

The swift and staggering job loss in the initial months is only one anomaly of this “recession.” From industry distribution to business size to worker demographics, this downturn is different than any other in modern U.S. history.


Declines in employment have been broad-based throughout the economy, yet they exhibit substantial heterogeneity across industries.

No industry has been immune to this pandemic recession; however, the industries that have been hardest hit at the beginning of the pandemic recession are those that rely heavily on social, interpersonal interactions. Industries such as leisure and hospitality have seen the largest declines in employment at over 50%. The smallest employment declines so far have been in sectors that employ higher-educated workers and likely more able to telework, such as Finance/Insurance and Professional/Scientific/Tech Services.

This sectoral distribution has influenced jobs declines in multiple ways.

Small businesses have seen the greatest impact so far. The industries where we’ve seen the largest employment declines are also the industries traditionally populated by the smallest businesses. So, we can draw a correlation between the hardest-hit sectors and the differential decline in employment of small businesses.

Businesses with fewer than 50 employees have been reducing employment at rates of more than 25%, faster than their larger counterparts. Those with more than 100 employees saw declines of 15-20%.

When we look at employee demographics, we have never seen such magnitude of divergence across different types of workers.

While all demographic groups took a hit in April, the increase in unemployment had a correlation with sectoral losses. We looked at the wage, age and gender distribution to see how this downturn impacted workers across demographic groups.

First, the employment declines were disproportionately concentrated among lower-wage workers.

The fact that workers in the bottom of the wage distribution are more impacted is not surprising because we know historically that recessions have a greater impact on lower skilled workers. What sets this downturn apart is the magnitude of the difference between high- and low-wage workers.

We found that workers who make less than $15 an hour experienced a 35% employment decline, whereas those who make more than $32 an hour experienced a 9% job loss.

Second, we saw unequal effects when it comes to age and gender.

The study shows that younger workers are among those with the highest rates of decline. Workers between 21 and 30 have seen job losses of 22%. But what was interesting, workers over 60 also saw a large employment decline of 22%.

Another surprising data point is gender disparity in employment declines. Job losses are 3-4% larger for women than men, 22% and 18%, respectively. Gender disparities in a recession are rare. The likely explanation is the higher prevalence of women in industries hardest hit. What we don’t know yet — and what is worth studying in the future — is what role this will play in gender pay equity.

From the data, this “recession” is unlike any other we have experienced. It has affected industries, businesses and populations unequally in ways we haven’t seen before., We have limited resources on which to draw conclusions about how the coming months will unfold, but from the early months, we can surmise this downturn will continue to have unequal effects and may yet surprise us in the ways it is different from the recessions that have come before.


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