Pandemic restrictions and shutdowns don't have lasting effect on jobs, new research finds

Business reopens after COVID-19 pandemic and worker flips "open" sign on shop

From the start of the COVID-19 pandemic, policymakers have struggled to balance the public health benefits of restrictions with their economic consequences. New research finds that virus-related restrictions don’t have lasting effects on jobs but virus-related deaths do.

In a new policy brief and research paper, Upjohn Institute Senior Economist Brad Hershbein and Harry Holzer of Georgetown University find that restrictions reduce employment while they’re in place. However, jobs rebound quickly when the restrictions are eased.

In contrast, deaths from the virus produce a lasting drag on employment. Even if a state’s high COVID-19 mortality rate plummeted suddenly and permanently, the employment rate might not recover for months.

Hershbein and Holzer focused on restrictions that affect economic activity, such as closures or limitations on bars, restaurants and other businesses; restrictions on gathering; school closures; quarantines and stay-at-home orders. Although states across the nation enacted restrictions in March and April, 2020, some states quickly lifted their restrictions.

States’ varying policies, combined with the uneven spread of the virus, created a natural laboratory that allowed Hershbein and Holzer to tease out the separate effects of caseloads, deaths and restrictions on employment.

The research sheds new light on competing narratives of the pandemic. The authors found that the rate of new COVID-19 caseloads doesn’t decrease the employment rate. State restriction opponents advanced similar arguments as evidence that the virus’ risks were overstated.

That view is short-sighted, according to the paper. When states lift restrictions, the economy gets a boost but so does the virus. New cases take time to turn into hospitalizations and deaths, which do decrease the employment rate.

A state’s current COVID-19 death rate and its cumulative death rate both matter for employment. By December 2020, a state with 100 more deaths per 100,000 people would be expected to have an employment rate 3 percentage points lower. For a state with 5 million working-age people, that’s 150,000 fewer people with jobs.

The research paper is titled "The COVID-19 Pandemic's Evolving Impacts on the Labor Market: Who's Been Hurt and What We Should Do."

The policy brief is "COVID-19's Impacts on the Labor Market in 2020."

Experts

Brad J. Hershbein headshot

Brad J. Hershbein

Senior Economist and Communications Advisor

Research Topics: Labor Market Issues