Hit Hard but Recover Slowly: The Asymmetric Effects of Social Distancing Policies on the US Labor Market

Abstract

This study employs a difference-in-differences approach to examine the US labor market response to two widely used social distancing policies, stay-at-home (SAH) order and non-essential business closure, with special attention paid to the asymmetric effect of the policies’ imposition and lifting. Exploiting the variation across states and time, we find that state employment rates declined by 4.3% and 1.9% for the two policies respectively, within one month of the enaction of social distancing policies, but the recovery was slower after the policies were removed. We also highlight that the low-income group suffered the highest employment rate drop from the SAH enaction while presenting the mildest rebound. Self-employed workers were more affected by the policy impositions but recovered slightly faster than wage earners. Our results suggest persistent efforts must be made after the pandemic, especially for more vulnerable groups in the labor market.