What Caused the Beveridge Curve to Shift Higher in the United States During the Pandemic?

January 12, 2024

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Format: Chicago

Gene Kindberg-Hanlon, and Michael Girard. What Caused the Beveridge Curve to Shift Higher in the United States During the Pandemic?, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The Beveridge curve shifted substantially higher in the United States following the start of the COVID pandemic. In 2022, vacancies reached record highs across all sectors while unemployment fell to pre-pandemic lows. At the same time, the pandemic has resulted in severe labor shortages, and we estimate that the labor force was approximately 2 million below trend at the start of 2023. We exploit state-level data in the United States to find that lower immigration, higher excess mortality due to COVID, and falling older-worker labor force participation were associated with larger upward shifts in the Beveridge curve. We also find that states that had a larger employment concentration in contact-intensive sectors had larger upward shifts in their Beveridge curve. While the effect of sectoral reallocation and rehiring has been shown in theoretical models to lift the Beveridge curve, we show that worker shortages also result in an upward shift in the Beveridge curve if they increase the marginal product of labor. This result holds in a search and matching model with on-the-job search, but does not hold without on-the-job search.

Subject: COVID-19, Health, Labor, Labor force, Labor markets, Labor shortages, Unemployment

Keywords: Beveridge Curve, COVID, COVID pandemic, COVID-19, Global, Labor force, Labor markets, Labor shortages, Pandemic low, Reallocation effect, Unemployment, Worker admission

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/008
Stock No:

WPIEA2024008
ISBN:

9798400263415
ISSN:

1018-5941

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