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Measuring Labor Supply and Demand Shocks during COVID-19

Author

Listed:
  • Pedro Brinca
  • Joao B. Duarte
  • Miguel Faria-e-Castro

Abstract

We measure labor demand and supply shocks at the sector level around the COVID-19 outbreak by estimating a Bayesian structural vector autoregression on monthly statistics of hours worked and real wages. Most sectors were subject to large negative labor supply and demand shocks in March and April, with substantial heterogeneity in the size of shocks across sectors. Our estimates suggest that two-thirds of the drop in the aggregate growth rate of hours in March and April 2020 are attributable to labor supply. We validate our estimates of supply shocks by showing that they are correlated with sectoral measures of telework.

Suggested Citation

  • Pedro Brinca & Joao B. Duarte & Miguel Faria-e-Castro, 2020. "Measuring Labor Supply and Demand Shocks during COVID-19," Working Papers 2020-011, Federal Reserve Bank of St. Louis, revised Jul 2021.
    • Handle: RePEc:fip:fedlwp:87978
    DOI: 10.20955/wp.2020.011
    Note: Publisher DOI: https://doi.org/10.1016/j.euroecorev.2021.103901
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    More about this item

    Keywords

    Supply and Demand Shocks; COVID-19; Structural Vector Autoregressions; Sign Restrictions;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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