COVID-19, labor demand, and government responses: evidence from job posting data

Business Economics https://doi.org/10.1057/s11369-020-00192-2 ORIGINAL ARTICLE COVID‑19, labor demand, and government responses: evidence from job posting data Xiaobing Shuai1 · Christine Chmura1 · James Stinchcomb1 © National Association for Business Economics 2020 Abstract Using high-frequency job advertisement data, this paper evaluates dynamics among COVID-19, labor market, and government policies. We find that COVID-19 has caused a significant decline in labor demand, by as much as 30%, measured by the number of job advertisements. But the pandemic did not result in noticeable changes in advertised wages. Regarding the roles of government policies, the study finds that the “stay-at-home” measures implemented by states appeared to suppress labor demand. The Paycheck Protection Program (PPP) program helps to stabilize the advertised wages, but also suppresses labor demand. Finally, the pandemic may increase labor demand for certain healthcare-related occupations. Keywords COVID-19 · Labor demand · Government policy · Job advertisement 1 Introduction The COVID-19 pandemic has attacked the national economy in a manner not experienced in modern times. This pandemic has impacted every community and industry in the United States. Information about the pandemic’s spread, effective treatment and prevention, and government response is evolving rapidly. Consequently, any economic analysis of the pandemic should be considered preliminary. Even with this uncertainty, it is clear that this pandemic has affected the economy in significant ways. Similarly, state and federal government actions and policies are also changing quickly, which have a profound influence on the national and regional economies. As the pandemic started to spread in the United States, in March and April of 2020, almost all states (with the exception of a few such as North and South Dakota, and Nebraska) implemented “stayat-home” orders,1 which essentially closed major components of their economies. Essential businesses such as food and agriculture, energy, and healthcare were allowed to remain open while industries such as recreation, entertainment, and restaurants were under restrictions (Mervosh et al. 2020). Since early May, many states, led by those in the south, such * Xiaobing Shuai 1 Chmura Economics & Analytics, Richmond, USA as Georgia and Texas, started the process of reopening their economies. By late June, all states were in different phases of reopening (Mervosh et al. 2020).2 Federal actions also have had profound influences on the economy. On March 27, 2020, the U.S. Congress passed—and the President signed into law—the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act temporarily expanded unemployment insurance benefits, by offering an additional $600 per week of pandemic unemployment compensation (PUC) to unemployed workers through the end of July 2020. The CARES Act also provided payments of up to $1200 per person to eligible Americans. In addition, this law included the Paycheck Protection Program (PPP), which allocated $349 billion as loans to small businesses3 to help them continue to pay their employees (Werner 2020).4 In late April, Congress passed, and the President signed another law that injected $310 billion to replenish the PPP program.5 The 1 Some states call it “shelter-in-place” orders. The cut-off point for data collection is the end of June. As a result, the latest surge in infections is not captured in this paper. 3 Small businesses are defined as those employing 500 or fewer people. 4 This program provides forgivable loans to small businesses. The loans will be forgiven as long as they are used to cover payroll, most mortgage interest, rent, and utilities over an eight-week period and if employment and compensation levels do not decrease. Source: https ://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf. 5 The covered period is 24 weeks beginning with the PPP loan disbursement date, or 8 weeks if borrowers received its loan before June 5, 2020. Source: U.S. Treasury. 2 Vol.:(0123456789) X. Shuai et al. expanded unemployment benefits and PPP policies aimed to moderate the effects of the COVID-19 pandemic on the economy. As of October, Congress was continuing to consider another relief package for American people and businesses. The impact of COVID-19 and the effectiveness of government policies have received intense interest from economists and policy makers. To contribute to this discussion, we utilize high-frequency, real-time job advertisement (posting) data to analyze the effect of the COVID-19 pandemic on key labor market indicators, such as labor demand and wage rates, during the early phases of the pandemic, namely the business lockdown and initial economic recovery period from March to June 2020.6 The real-time job advertisement data are updated daily from many online job-sites, thus providing the most timely signals of the labor market. Job ads are considered a leading indicator of employment, because businesses only place ads for jobs when they expect demand for their goods and services to grow. Once an ad is placed, it takes days if not weeks to fill the position. While the U.S. labor market suffered massive job losses during the pandemic, we are interested to learn whether different government policies had been effective in stabilizing the labor market, particularly the PPP program and expanded unemployment benefits. We hypothesize that due to expanded unemployment compensation (PUC) offered by the CARES Act, reservation wages for those losing jobs due to the pandemic increased, pushing up market wages. After a brief summary of existing research on COVID-19 and the labor market, we first utilize a difference-in-difference (DID) approach to examine the effect of COVID-19 on labor demand and advertised wages. We then construct an econometric model to evaluate the effect of different government policies on labor demand and wages. We find that COVID-19 caused a significant decline in labor demand, by as much as 30%, measured by the number of job advertisements. But the pandemic did not result in noticeable changes in advertised wages. The econometric analysis yields some interesting results. The lockdown measures (or “stay-at-home” orders) implemented by states appeared to suppress labor demand. The PPP program helped to stabilize advertised wages, but also suppressed labor demand. Finally, the pandemic may have increase labor demand in certain healthcare-related occupations. Those results should be of interest to policymakers and applied economists as they develop strategies to help Americans and businesses navigate this pandemic. 2 Studies on COVID‑19 In the short period since COVID-19 broke out, its economic impacts have received a tremendous amount of attention, with the literature expanding daily. Some of those early papers were collected in the book Economics in the Time of Covid-19, edited by Baldwin and Mauro (2 (...truncated)