Will the Covid-19 pandemic lead to job reallocation and persistent unemployment?

David, Joel M.

Newsletter

Will the Covid-19 pandemic lead to job reallocation and persistent unemployment?

Abstract: The Covid-19 pandemic has had an enormous impact on the U.S. economy. Nowhere are the effects more dramatic than in the labor market: In a span of just two months, the unemployment rate increased from 3.5% in February 2020—a low not seen since the late 1960s—to 14.7% in April—a high not seen since the Great Depression—before falling modestly in May and June. How persistent are these effects likely to be? Will the labor market recover quickly once pandemic-related restrictions are fully lifted, or will unemployment remain at elevated levels further into the future?

Keywords: Reallocation; unemployment; stock return dispersion; Covid-19; Employment;

JEL Classification: E24; E27; E44; J64;