Author: Andrew Berger-Gross
North Carolina saw a record-high number of layoffs during the COVID-19 recession. However, the vast majority of workers who lost their job were quickly re-employed, with most of them returning to their pre-layoff industry sector and their pre-layoff employer. This article uses data from the North Carolina Common Follow-up System to show that the COVID-19 recession had a much smaller impact on displaced workers than previous recessions.
This article examines a cohort of North Carolina residents who filed initial claims for unemployment insurance—a common proxy for job displacement—during the COVID-19 recession.1 We compare their outcomes to workers who were laid off during the Great Recession of 2007-2009 and those who lost their job during the 2001 recession to assess whether the COVID-19 recession had a larger impact on displaced workers than previous recessions.2
We find that nearly 80% of workers laid off during the COVID-19 recession were re-employed in North Carolina within one quarter (three months) after their layoff date, while only around half those who lost their job during previous recessions were able to return to work the following quarter [Figure 1]. This outcome disparity lasted for at least six quarters (a year and a half) following layoff; nearly 78% of workers were employed six quarters after losing their job during the COVID-19 recession, compared to only 63% during the Great Recession and 51% during the 2001 recession.
Most of those re-employed after the COVID-19 recession returned to the same industry sector where they worked in the quarter prior to their initial layoff [Figure 2].3 This is a very different outcome from what we saw during the Great Recession and the 2001 recession, when more re-employed workers switched to a different industry sector.
Likewise, we find most of those re-employed after the COVID-19 recession returned to the same employer they worked for prior to their initial layoff, while those who lost work during the Great Recession and the 2001 recession were unlikely to return to their pre-layoff employer [Figure 3].4
How is it possible that the COVID-19 recession led to a record-high number of layoffs, and yet had a much smaller impact on displaced workers than previous recessions? This is because, in contrast to the last two recessions, the COVID-19 recession was unusually short; featured a large amount of temporary layoff activity; and had relatively little impact on the structure of our economy:
- The COVID-19 recession only lasted two months, whereas the Great Recession lasted 18 months, and the 2001 recession lasted eight months. Indeed, the COVID-19 recession was by far the shortest recession on record. Although hundreds of thousands of North Carolinians lost work during the COVID-19 recession, our economy bounced back rapidly during late 2020 and 2021, in contrast to the sluggish recoveries that followed the last two recessions. North Carolina’s labor market was remarkably tight following the COVID-19 recession, with a record-low number of jobseekers per job opening. Most people who wanted to work after the COVID-19 recession were able to find employment.
- While previous recessions saw widespread, permanent layoffs, the COVID-19 recession was characterized by an unprecedented number of temporary layoffs – workers who were let go by their employer with the understanding they would eventually return to their previous position. Most workers who were laid off during the COVID-19 recession were able to return to their pre-layoff employer.
- Unlike previous recessions, COVID-19 did not lead to major structural changes in our economy. For example, the 2001 recession and the Great Recession led to massive declines in North Carolina’s manufacturing sector, and we’ve never come close to regaining the level of manufacturing employment we had back in 2000. In contrast, the COVID-19 recession was defined by job losses in our leisure and hospitality sector, which rapidly returned to near pre-pandemic employment levels despite severe capacity limitations and labor shortages. Most workers who lost their job during the COVID-19 recession didn’t need to switch industries to find new employment.
1To enable comparability over time, we limit our analysis to claimants who were approved for regular state UI benefits. Pandemic UI benefit recipients are not included in our sample.
2Following the National Bureau of Economic Research, we define the COVID-19 recession as February 2020 through April 2020, the Great Recession as December 2007 through June 2009, and the 2001 recession as March 2001 through November 2001.
3We identify the sector where each individual earned the most wages in a given quarter as their primary industry sector of employment. Industry sectors are categorized at the 2-digit North American Industry Classification System (NAICS) level.
4We use employers’ UI account number as a unique identifier for firms. We identify the firm where each individual earned the most wages in a given quarter as their primary employer.