Labor reallocation during the Covid-19 pandemic

Aaronson, Daniel; Lewers, Riley; Sullivan, Daniel G.

Newsletter

Labor reallocation during the Covid-19 pandemic

Abstract: The Covid-19 pandemic and associated recession have had dramatically different effects across industries, with some, including large parts of the leisure and hospitality sector, truly devastated and others, like much of the manufacturing sector, able to recover quite quickly. This has led some analysts to describe the pandemic as a reallocation shock, requiring substantial movement of labor across industries. Such a process likely requires substantial time, during which the natural rate of unemployment may be elevated. In this Chicago Fed Letter, we consider two questions: First, has the need for labor reallocation risen, and second, has there been an increase in the amount of reallocation that is actually occurring?

JEL Classification: E24; J63;