We use traditional and non-traditional data sources to measure the collapse and subsequent partial recovery of the U.S. labor market in Spring 2020. Using daily data on hourly workers in small businesses, we show that the collapse was extremely sudden – nearly all of the decline in hours of work occurred between March 14 and March 28. Both traditional and non-traditional data show that, in contrast to past recessions, this recession was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job loss in small businesses reflected firms that closed entirely. Nevertheless, the vast majority of laid off workers expected, at least early in the crisis, to be recalled, and indeed many of the businesses have reopened and rehired their former employees. There was a reallocation component to the firm closures, with elevated risk of closure at firms that were already unhealthy, and more reopening of the healthier firms. At the worker-level, more disadvantaged workers (less educated, non-white) were more likely to be laid off and less likely to be rehired. Worker expectations were strongly predictive of rehiring probabilities. Turning to policies, shelter-in-place orders drove some job losses but only a small share: many of the losses had already occurred when the orders went into effect. Last, we find that states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence so far in support of the view that high UI replacement rates drove job losses or slowed rehiring substantially.
This paper was released as part of the Brookings Papers on Economic Activity, scheduled for June 25, 2020.