Drawing on firm-level forecasts at a one-year horizon in the Survey of Business Uncertainty (SBU), we construct novel, forward-looking reallocation measures for jobs and sales. These measures rise sharply after February 2020, reaching rates in April that are 2.4 (3.9) times the pre-COVID average for jobs (sales). We also draw on special SBU questions to estimate that the COVID-19 shock caused 3 new hires for every 10 layoffs, that 32-42% of COVID-induced layoffs will be permanent, and that one-tenth of all work days (one-fifth for office workers) will shift from business premises to residences in the post-pandemic world relative to the pre-pandemic situation. Our survey evidence aligns well with anecdotal evidence of large pandemic-induced demand increases at many firms, evidence on job openings, gross job creation and gross business formation, and a sharp pandemic-induced rise in equity return dispersion across firms. After developing the evidence, we consider implications for the economic outlook and for policy responses to the pandemic. Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, land-use restrictions, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock.

A revision of this paper was released as part of the Brookings Papers on Economic Activity, scheduled for June 25, 2020.

More Research From These Scholars

White Paper Jun 16, 2020

The Unprecedented Stock Market Reaction to COVID-19

Scott R. Baker, Nicholas Bloom, Steven J. Davis, Kyle Kost, Marco Sammon, Tasaneeya Viratyosin
Topics:  Financial Markets, COVID-19
BFI Working Paper Jan 16, 2019

Dynamism Diminished: The Role of Housing Markets and Credit Conditions

Steven J. Davis, John Haltiwanger
Topics:  Monetary Policy, Employment & Wages, Fiscal Studies, Economic Mobility & Poverty
BFI Working Paper Sep 21, 2020

Firm-level Risk Exposures and Stock Returns in the Wake of COVID-19

Steven J. Davis, Stephen Hansen, Cristhian Seminario-Amez
Topics:  COVID-19, Financial Markets