The Economic Impacts of Covid-19: Evidence from a New Public Database Built Using Private Sector Data

135 Pages Posted: 29 Jun 2020 Last revised: 15 Jun 2023

See all articles by Raj Chetty

Raj Chetty

Harvard University

John Friedman

Brown University

Nathaniel Hendren

Harvard University - Department of Economics

Michael Stepner

Harvard University

The Opportunity Insights Team

Harvard University

Date Written: June 2020

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.

Suggested Citation

Chetty, Raj and Friedman, John and Hendren, Nathaniel and Stepner, Michael and Team, The Opportunity Insights, The Economic Impacts of Covid-19: Evidence from a New Public Database Built Using Private Sector Data (June 2020). NBER Working Paper No. w27431, Available at SSRN: https://ssrn.com/abstract=3637732

Raj Chetty (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

John Friedman

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Nathaniel Hendren

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Michael Stepner

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

The Opportunity Insights Team

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

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