Business Exit During the Covid-19 Pandemic: Non-Traditional Measures in Historical Context

59 Pages Posted: 27 Oct 2020 Last revised: 19 Apr 2021

See all articles by Leland Dod Crane

Leland Dod Crane

Board of Governors of the Federal Reserve System

Ryan Decker

Board of Governors of the Federal Reserve System

Aaron Flaaen

Board of Governors of the Federal Reserve System

Adrian Hamins-Puertolas

Board of Governors of the Federal Reserve System

Christopher Johann Kurz

Board of Governors of the Federal Reserve System

Date Written: October, 2020

Abstract

Lags in official data releases have forced economists and policymakers to leverage "alternative" or "non-traditional" data to measure business exit resulting from the COVID- 19 pandemic. We first review official data on business exit in recent decades to place the alternative measures of exit within historical context. For the U.S., business exit is countercyclical and fairly common, with about 7.5 percent of firms exiting annually in recent years. Both the high level and the cyclicality of exit are driven by very small firms and establishments. We then explore a range of alternative measures of business exit, including novel measures based on paycheck issuance and phone-tracking data, which indicate exit was elevated in certain sectors during the first year of the pandemic. The evidence is mixed, however; many industries have likely seen lower-than-usual exit rates, and exiting businesses do not appear to represent a large share of U.S. employment. Actual exit is likely to have been lower than widespread expectations from early in the pandemic. Moreover, businesses have recently exhibited notable optimism about their survival prospects.

JEL Classification: C55, C81, D22, E32

Suggested Citation

Crane, Leland Dod and Decker, Ryan and Flaaen, Aaron and Hamins-Puertolas, Adrian and Kurz, Christopher Johann, Business Exit During the Covid-19 Pandemic: Non-Traditional Measures in Historical Context (October, 2020). FEDS Working Paper No. 2020-089R1, Available at SSRN: https://ssrn.com/abstract=3719278 or http://dx.doi.org/10.17016/FEDS.2020.089r1

Leland Dod Crane (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ryan Decker

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Aaron Flaaen

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-973-7338 (Phone)

HOME PAGE: http://www.federalreserve.gov/econresdata/aaron-b-flaaen.htm

Adrian Hamins-Puertolas

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Christopher Johann Kurz

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551

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