The economic impacts of COVID-19: Evidence from a new public database built using private sector data
NBER link, Webpage with info about paper (2023 version), pdf link to 2023 version.
site for data with pretty charts
BibTeX
@techreport{chetty2020economic,
title={The economic impacts of COVID-19: Evidence from a new public database built using private sector data},
author={Chetty, Raj and Friedman, John N and Stepner, Michael and The Opportunity Insights Team},
year={2020},
institution={national Bureau of economic research}
}
WARNING: above bibtex info is for 2020 working paper on NBER. Their page for the paper mentions that it is forthcoming in the QJE as of 2023.
Abstract
We build a publicly available database that tracks economic activity in the U.S. at a granular level in real time using anonymized data from private companies. We report weekly statistics on consumer spending, business revenues, job postings, and employment rates disaggregated by county, sector, and income group. Using the publicly available data, we show how the COVID- 19 pandemic affected the economy by analyzing heterogeneity in its impacts across subgroups. High-income individuals reduced spending sharply in March 2020, particularly in sectors that require in-person interaction. This reduction in spending greatly reduced the revenues of small businesses in affluent, dense areas. Those businesses laid off many of their employees, leading to widespread job losses, especially among low-wage workers in such areas. High-wage workers experienced a “V-shaped” recession that lasted a few weeks, whereas low-wage workers experienced much larger, more persistent job losses. Even though consumer spending and job postings had recovered fully by December 2021, employment rates in low-wage jobs remained lower in areas that were initially hard hit, indicating that the job losses due to the demand shock led to a persistent reduction in labor supply. Building on this diagnostic analysis, we evaluate the impacts of fiscal stimulus policies designed to stem the downward spiral in economic activity. Cash stimulus payments led to sharp increases in spending early in the pandemic, but much smaller responses later in the pandemic, especially for high-income households. Real-time estimates of marginal propensities to consume provided better forecasts of the impacts of subsequent rounds of stimulus payments than historical estimates. Overall, our findings suggest that fiscal policies can stem secondary declines in consumer spending and job losses, but cannot restore full employment when the initial shock to consumer spending arises from health concerns. More broadly, our analysis demonstrates how public statistics constructed from private sector data can support many research and real-time policy analyses, providing a new tool for empirical macroeconomics.
(emphasis mine)
Notes / Excerpts
findings from non-technical summary:
- high income households accounted for most of the reduction in spending.
- Bottom quartile was back to normal levels of spending by summer.
- High income HHs cut spending because of health concerns. Evidence: fell most on things like food services and transportation.
- Contrast with typical recessions where spending on services is same, but on durable goods falls.
- Small business revenue e declined by largest percent in affluent areas.
- businesses in affluent areas laid of more low-wage workers and posted fewer new jobs.
- recession was v-shaped for high-wage workers, more persistant for low wage.
- employment for top quartile returnt o prepandmic level by June 2020 (graph doesn’t show that?)
- “total number of jobs in the bottom quartile of the pre-pandemic wage distribution remained 21.2% below baseline even as of December 2021”
- But this is a confusing metric, because that includes workers who have a higher-paying job such that they’re no longer in the pre-pandemic bottom quartile. 🤨
- Stimulus payments became “less effective” over time
- What they mean is that all quartiles increased spending in response to 2020 stimulus, but high-income households just saved the 2021 stimulus.
- Sounds like myopia or something to me.
- Paper says its because high-income had a bigger consumption cut than income cut so built up a lot of savings. So not the consumption smoothing story I was imagining.
- By december 2021, employment was still lower in places where rich people initially reduced their spending.
Snippets from main paper
Spending reductions were concentrated in services that require in-person physical interaction, such as hotels and restaurants, consistent with contemporaneous work by Alexander and Karger (2023) and Cox et al. (2020).
Postings for jobs with low skill requirements fell sharply in April 2020, with a much larger reduction in high-rent areas than low-rent areas.
As a result of the labor demand shock, employment rates fell by 39% for workers with wage rates in the bottom quartile of the pre-COVID wage distribution as of April 15, 2020 … consistent with … Cajner et al. (2020)
top wage quartile, employment rates fell by 14%.
In December 2021, consumer spending and low-skill job postings had recovered. But there was still a sharp geographic gradient with respect to rent.
Employment rates in December 2021 were much more strongly related to the size of the initial shock to economic activity … than contemporaneous factors such as COVID case rates or unemployment benefit levels.
I wonder to what extend that represents workers just moving their jobs elsewhere? Like, these are low-income jobs in high-rent areas, right? The workers didn’t take those jobs because they are local and convenient. The particular slice of the data they look at must select for commuters, right?