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Women’s labor force participation grew precipitously in the latter half of the 20th century, but by around the year 2000, that progress had stalled. In fact, the labor force participation rate for prime-age women (those aged 25 to 54) fell four percentage points between 2000 and 2015, breaking a decades-long trend. However, as the labor market gained traction in the aftermath of the Great Recession, more women were drawn into the labor force. In less than five years, between 2015 and early 2020, women’s labor force participation had recovered nearly all of the ground lost over the prior fifteen years. Then the pandemic hit, erasing these gains. In recent months, as the economy has begun to heal, women’s labor force participation has increased again, but there is much ground to be made up, especially for Black and Hispanic women. A strong labor market with rising wages, as was the case in the years leading up to the pandemic, will be instrumental in bringing more women back into the labor force.
David Dam, Sebastian Heise, Davide Melcangi, and Will Schirmer
The services sector was hit hard during the COVID-19 pandemic. Small businesses were particularly affected, and many of them were forced to close. We examine the state of these firms using micro data from Homebase (HB), a scheduling and time tracking tool that is used by around 100,000 businesses, mostly small firms, in the leisure and hospitality and retail industries. The data reveal that 35 percent of businesses that were active prior to the pandemic are still closed and that most have been inactive for twenty weeks or longer. We estimate that each additional week of being closed reduces the probability that a business reopens by 2 percentage points. Moreover, an additional week of business closure lowers the share of workers that are rehired at reopening. Our estimates imply that only about 4 percent of the workers that are still laid off from the currently closed businesses will eventually be rehired by these businesses.
Household saving has soared in the United States and other high-income countries during the COVID-19 pandemic, despite widespread declines in wages and other private income streams. This post highlights the role of fiscal policy in driving the saving boom, through stepped-up social benefits and other income support measures. Indeed, in the United States, Japan, and Canada, government assistance has pushed household income above its pre-pandemic trajectory. We argue that the larger scale of government assistance in these countries helps explain why saving in these countries has risen more strongly than in the euro area. Going forward, how freely households spend out of their newly accumulated savings will be a key factor determining the strength of economic recoveries.
Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri, and Andrea Tambalotti
How will the U.S. economy emerge from the ongoing COVID-19 pandemic? Will it struggle to return to prior levels of employment and activity, or will it come roaring back as soon as vaccinations are widespread and Americans feel comfortable travelling and eating out? Part of the answer to these questions hinges on what will happen to the large amount of “excess savings” that U.S. households have accumulated since last March. According to most estimates, these savings are around $1.6 trillion and counting. Some economists have expressed the concern that, if a considerable fraction of these accumulated funds is spent as soon as the economy re-opens, the ensuing rush of demand might be destabilizing. This post argues that these savings are not that excessive, when considered against the backdrop of the unprecedented government interventions adopted over the past year in support of households and that they are unlikely to generate a surge in demand post-pandemic.
David Dam, Meghana Gaur, Fatih Karahan, Laura Pilossoph, and Will Schirmer
The ongoing COVID-19 pandemic and the various measures put in place to contain it caused a rapid deterioration in labor market conditions for many workers and plunged the nation into recession. The unemployment rate increased dramatically during the COVID recession, rising from 3.5 percent in February to 14.8 percent in April, accompanied by an almost three percentage point decline in labor force participation. While the subsequent labor market recovery in the aggregate has exceeded even some of the most optimistic scenarios put forth soon after this dramatic rise, the recovery has been markedly weaker for the Black population. In this post, we document several striking differences in labor market outcomes by race and use Current Population Survey (CPS) data to better understand them.
Ruchi Avtar, Rajashri Chakrabarti, and Maxim Pinkovskiy
The introduction of numerous social distancing policies across the United States, combined with voluntary pullbacks in activity as responses to the COVID-19 outbreak, resulted in differences emerging in the types of work that were done from home and those that were not. Workers at businesses more likely to require in-person work—for example, some, but not all, workers in healthcare, retail, agriculture and construction—continued to come in on a regular basis. In contrast, workers in many other businesses, such as IT and finance, were generally better able to switch to working from home rather than commuting daily to work. In this post, we aim to understand whether following the onset of the pandemic there was a wedge in the incidence of commuting for work across income and race. And how did this difference, if any, change as the economy slowly recovered? We take advantage of a unique data source, SafeGraph cell phone data, to identify workers who continued to commute to work in low income versus higher income and majority-minority (MM) versus other counties.
As the COVID-19 pandemic took hold in the United States, in just two months—between February and April 2020—the nation saw well over 20 million workers lose their jobs, an unprecedented 15 percent decline. Since then, substantial progress has been made, but employment still remains 5 percent below its pre-pandemic level. However, not all workers have been affected equally. This post is the first in a three-part series exploring disparities in labor market outcomes during the pandemic—and represents an extension of ongoing research into heterogeneities and inequalities in people’s experience across large segments of the economy including access to credit, health, housing, and education. Here we find that some workers were much more likely to lose their jobs than others, particularly lower-wage workers and those without a college degree, as well as women, minorities, and younger workers. However, as jobs have returned during the recovery, many of these differences have narrowed considerably, though some gaps are widening again as the labor market has weakened due to a renewed surge in the coronavirus. The next post in the series examines differences in patterns of commuting during the pandemic, and finds that workers in low-income and Black- and Hispanic-majority communities were more likely to commute for work. The final post in the series analyzes unemployment dynamics during the pandemic, and finds that Black workers experienced a lower job-finding rate and a higher separation rate into unemployment than white workers during the recovery, though this trend has reversed to some extent recently.
Andreas I. Mueller, Johannes Spinnewijn, and Giorgio Topa
In addition to its terrible human toll, the COVID-19 pandemic has also caused massive disruption in labor markets. In the United States alone, more than 25 million people lost their jobs during the first wave of the pandemic. While many have returned to work since then, a large number have remained unemployed for a prolonged period of time. The number of long-term unemployed (defined as those jobless for twenty-seven weeks or longer) has surged from 1.1 million to almost 4 million. An important concern is that the long-term unemployed face worse employment prospects, but prior work has provided no consensus on what drives this decline in employment prospects. This post discusses new findings using data on elicited beliefs of unemployed job seekers to uncover the forces driving long-term unemployment.
Ryan Bush, Haitham Jendoubi, Matthew Raskin, and Giorgio Topa
In late August, as part of the Federal Reserve’s review of Monetary Policy Strategy, Tools, and Communications, the Federal Open Market Committee (FOMC) published a revised Statement on Longer-Run Goals and Monetary Policy Strategy. As observers have noted, the revised statement incorporated important changes to the Federal Reserve’s approach to monetary policy. This includes emphasizing maximum employment as a broad-based and inclusive goal and focusing on “shortfalls” rather than “deviations” of employment from its maximum level. The statement also noted that, in order to anchor longer-term inflation expectations at the FOMC’s longer-run goal, the Committee would seek to achieve inflation that averages 2 percent over time. In this post, we investigate the possible impact of these changes on financial market participants’ expectations for policy rate outcomes, based on responses to the Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP) conducted by the New York Fed’s Open Market Trading Desk both shortly before and after the conclusion of the framework review. We find that the conclusion of the framework review coincided with a notable shift in market participants’ perceptions of the FOMC’s policy rate “reaction function,” in the direction of higher expected inflation and lower expected unemployment at the time of the next increase in the federal funds target range (or “liftoff”).
Jaison R. Abel, Jason Bram, Richard Deitz, and Jonathan Hastings
The New York-Northern New Jersey region experienced an unprecedented downturn earlier this year, one more severe than that of the nation, and the region is still struggling to make up the ground that was lost. That is the key takeaway at an economic press briefing held today by the New York Fed examining economic conditions during the pandemic in the Federal Reserve’s Second District. Despite the substantial recovery so far, business activity, consumer spending, and employment are all still well below pre-pandemic levels in much of the region, and fiscal pressures are mounting for state and local governments. Importantly, job losses among lower-wage workers and people of color have been particularly consequential. The pace of recovery was already slowing in the region before the most recent surge in coronavirus cases, and we are now seeing signs of renewed weakening as we enter the winter.
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