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Lockdowns and the US Unemployment Crisis

Author

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  • Christian Dreger

    (European University, Viadrina Frankfurt)

  • Daniel Gros

    (Centre for European Policy Studies (CEPS))

Abstract

The Covid-19 pandemic led to an unprecedented decline of economic activity at the globe scale. To slow down the spread of the virus, most governments reacted with various measures of social distancing, such as mobility controls, business and school closures, etc. We investigate the short-term impact of social distancing measures on the US labour market, using a panel threshold model with high frequency (weekly) data on unemployment across US states allowing for heteroscedasticity. Labour is a key input in production, and thus a good proxy for the state of the economy. We find that changes in the restrictiveness of mandated social distancing, as measured by the Oxford Stringency Index, exert a strong impact on unemployment. The bulk of the reaction of unemployment to a change in the social distancing restrictions does not arise immediately, but with a delay of 2–4 weeks. In addition, the impact is asymmetric. If the policies switch to tighter regulations, the increase in unemployment is quicker and higher in absolute value than a decrease after relaxation. The state of the pandemic, proxied by the number of new infections and fatalities, constitutes only a marginal factor.

Suggested Citation

  • Christian Dreger & Daniel Gros, 2021. "Lockdowns and the US Unemployment Crisis," Economics of Disasters and Climate Change, Springer, vol. 5(3), pages 449-463, October.
    • Handle: RePEc:spr:ediscc:v:5:y:2021:i:3:d:10.1007_s41885-021-00092-5
    DOI: 10.1007/s41885-021-00092-5
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    Cited by:

    1. Serra, Laura & Silva, José I. & Vall-llosera, Laura, 2022. "The unemployment effects of closing non-essential activities during the COVID-19 lockdown: The Spanish municipalities," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 806-819.
    2. Péter Füleky & István Szapudi, 2022. "Bird’s Eye View of COVID-19, Mobility, and Labor Market Outcomes Across the US," Economics of Disasters and Climate Change, Springer, vol. 6(2), pages 339-353, July.
    3. Gächter, Martin & Huber, Florian & Meier, Martin, 2022. "A shot for the US economy," Finance Research Letters, Elsevier, vol. 47(PA).
    4. Frenkel Michael & Stadtmann Georg & Zimmermann Lilli, 2023. "Labor market effects of COVID-19 shocks," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 59(1), pages 3-12, March.
    5. Gros, Daniel & Ounnas, Alexandre, 2021. "Labour market responses to the Covid-19 crisis in the United States and Europe," CEPS Papers 32985, Centre for European Policy Studies.
    6. Zarifhonarvar, Ali, 2022. "A Survey on the Impact of Covid-19 on the Labor Market," EconStor Preprints 265549, ZBW - Leibniz Information Centre for Economics.
    7. Ali Zarifhonarvar, 2023. "A Survey on the Impact of Covid-19 on the Labor Market," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 9(1), pages 1-10, 03-2023.
    8. Serra, Laura & Silva, José I. & Vall·llosera, Laura, 2022. "The unemployment effects of closing the non-essential activities during the COVID-19 lockdown: The case of 8,108 Spanish municipalities," MPRA Paper 112138, University Library of Munich, Germany.

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    More about this item

    Keywords

    Corona pandemic; Lockdown and unemployment; Policy response;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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