Understanding the Impact of COVID-19 Intervention Policies on the Labor Market of the Hospitality and Retail Industries

Abstract

Using new high-frequency data that covers a representative sample of small business owners, we investigate the effects of the COVID-19 pandemic and the resulting state policies on the retail, hospitality, food, and accommodation sectors. First, we find that business closure policies are associated with a 20-30% reduction of non-salaried workers in the hospitality industry and a 10-20% decline for the retail sector from March-April of 2020. Second, business reopening policies play a statistically significant role in reviving the labor market, though at a slower pace. Third, considerable differences exist in the impact of policies on the labor market by state. Fourth, the rise of new cases on a daily basis is associated with the continued deterioration of the labor market. We use these results to provide policy and managerial recommendations for restoring the labor market and curbing the transmission of COVID-19.

Keywords: COVID-19, labor market, employment, coronavirus intervention policy, retail and hospitality sectors

JEL Classification: H75, J21, J23