The Covid-19 pandemic and associated recession have had dramatically different effects across industries, with some, including large parts of the leisure and hospitality sector, truly devastated and others, like much of the manufacturing sector, able to recover quite quickly. This has led some analysts to describe the pandemic as a
reallocation shock, requiring substantial movement of labor across industries.[ 1] Such a process likely requires substantial time, during which the natural rate of unemployment may be elevated. In this
Chicago Fed Letter, we consider two questions: First, has the need for labor reallocation risen, and second, has there been an increase in the amount of reallocation that is actually occurring?
School and day care center restrictions during the Covid-19 pandemic have presented enormous challenges to parents trying to juggle work with child-care responsibilities. Still, empirical evidence on the impact of pandemic-related child-care constraints on the labor market outcomes of working parents is somewhat mixed. Some studies suggest the pandemic had no additional impact on the labor supply of parents, while other studies show not only that it did but that the negative impact was disproportionately borne by working mothers.[ 1]
The largest impact has been on Black, single, and non-college-educated mothers, mirroring widening employment disparities in the broader labor market since March.