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Unemployment Paths in a Pandemic Economy

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  • Petrosky-Nadeau, Nicolas

    (Federal Reserve Bank of San Francisco)

  • Valletta, Robert G.

    (Federal Reserve Bank of San Francisco)

Abstract

The COVID-19 pandemic has upended the U.S. economy and labor market. We assess the initial spike in unemployment due to the virus response and possible paths for the official unemployment rate through 2021. Substantial uncertainty surrounds the path for measured unemployment, depending on the path of the virus and containment measures and their impact on reported job search activity. We assess potential unemployment paths based on historical patterns of monthly flows in and out of unemployment, adjusted for unique features of the virus economy. The possible paths vary widely, but absent hiring activity on an unprecedented scale, unemployment could remain in double-digits into 2021. We also find that the increase in measured unemployment could be meaningfully tempered by a substantial reduction in labor force participation.

Suggested Citation

  • Petrosky-Nadeau, Nicolas & Valletta, Robert G., 2020. "Unemployment Paths in a Pandemic Economy," IZA Discussion Papers 13294, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13294
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    1. Dingel, Jonathan I. & Neiman, Brent, 2020. "How many jobs can be done at home?," Journal of Public Economics, Elsevier, vol. 189(C).
    2. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "Labor Markets During the Covid-19 Crisis: A Preliminary View," Department of Economics, Working Paper Series qt7rx7t91p, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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    5. Tomaz Cajner & Leland D. Crane & Ryan A. Decker & Adrian Hamins-Puertolas & Christopher J. Kurz, 2020. "Tracking Labor Market Developments during the COVID-19 Pandemic: A Preliminary Assessment," Finance and Economics Discussion Series 2020-030, Board of Governors of the Federal Reserve System (U.S.).
    6. Miguel Faria-e-Castro, 2020. "Back-of-the-Envelope Estimates of Next Quarter’s Unemployment Rate," On the Economy 87740, Federal Reserve Bank of St. Louis.
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    Cited by:

    1. Lucjan T. Orlowski, 2021. "The 2020 Pandemic: Economic repercussions and policy responses," Review of Financial Economics, John Wiley & Sons, vol. 39(1), pages 20-26, January.
    2. Erin Lacey King & Stephan Weiler & Eric Stewart & Kendall Stephenson, 2022. "Multi-Level Nowcasting: Estimation in a Post-COVID Landscape," Economies, MDPI, vol. 10(8), pages 1-31, August.
    3. Jackson, Paul & Ortego-Marti, Victor, 2024. "Skill loss during unemployment and the scarring effects of the COVID-19 pandemic," Labour Economics, Elsevier, vol. 88(C).
    4. Hong, Sunmin & Jeong, Dohyo & Kim, Pyung, 2024. "Have offender demographics changed since the COVID-19 pandemic? Evidence from money mules in South Korea," Journal of Criminal Justice, Elsevier, vol. 91(C).
    5. Nurgun Kul Parlak & Ayse Nur Ciftci, 2022. "Pandeminin Kayit Disi Istihdami Dislama Etkisi: Turkiye’de Formel-Enformel Emek Piyasalarindaki Ayrisma," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(82), pages 93-135, June.
    6. Carmen Valentina Radulescu & Georgiana-Raluca Ladaru & Sorin Burlacu & Florentina Constantin & Corina Ioanăș & Ionut Laurentiu Petre, 2020. "Impact of the COVID-19 Pandemic on the Romanian Labor Market," Sustainability, MDPI, vol. 13(1), pages 1-23, December.
    7. Pizzinelli, Carlo & Shibata, Ippei, 2023. "Has COVID-19 induced labor market mismatch? Evidence from the US and the UK," Labour Economics, Elsevier, vol. 81(C).
    8. Ali Gungoraydinoglu & Ilke Öztekin & Özde Öztekin, 2021. "The Impact of COVID-19 and Its Policy Responses on Local Economy and Health Conditions," JRFM, MDPI, vol. 14(6), pages 1-27, May.

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    More about this item

    Keywords

    labor market; unemployment; employment; labor force; COVID-19;
    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
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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