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Effects of Social Distancing Policy on Labor Market Outcomes -- by Sumedha Gupta, Laura Montenovo, Thuy D. Nguyen, Felipe Lozano Rojas, Ian M. Schmutte, Kosali I. Simon, Bruce A. Weinberg, Coady Wing

As part of the public health response to the COVID-19 epidemic, states enacted a set of social distancing policies between March and April of 2020. These actions together with voluntary social distancing have reduced the rate of new COVID-19 cases and deaths. But there are growing concerns that the social distancing that occurred during March and April also imposed large costs on workers and businesses who were mandated or encouraged to cease operating and stay at home.
In this paper, we examine the impact of social distancing policies on work related mobility, unemployment internet search, initial unemployment claims, and individual measures of employment, hours worked, and earnings. Our main analysis is based on monthly CPS data, and leverages the fact that some states instituted stay-at-home mandates later than others. We find that the employment rate fell by about 1.7 percentage points for every extra 10 days that a state was closed during the period March 12-April 12. Between January and April, employment rates fell by about 12 percentage points nationally. Our difference in difference estimates imply that about 40% of the decline was driven by a nationwide shock and about 60% of the decline was driven by state social distancing policies. The negative employment effects of state social distancing policies were larger for workers in “non-essential” industries, workers without a college degree, and early career workers. Additionally, we find relatively modest changes in hours worked and earnings among those who remain employed, with large changes due to changes in employment status. To obtain sharper timing around changes, we augment our CPS estimates with results from a wide range of higher-frequency data, including unemployment insurance claims, Google Trends data on unemployment-related searches, and work-related cell mobility data.
As states relax business closures, ensuring gains in labor market activities in ways that maintain gains in mitigation of the COVID-19 “surge” and public health risks will be key considerations to monitor.
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