COVID-19 Is a Persistent Reallocation Shock

Jose Maria Barrero, Nicholas Bloom, Steven J. Davis, and Brent H. Meyer
Working Paper 2021-3
January 2021

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Abstract: Drawing on data from the firm-level Survey of Business Uncertainty, we present three pieces of evidence that COVID-19 is a persistent reallocation shock. First, rates of excess job and sales reallocation over 24-month periods have risen sharply since the pandemic struck, especially for sales. We compute these rates by aggregating over monthly firm-level observations that look back 12 months and ahead 12 months. Second, as of December 2020, firm-level forecasts of sales revenue growth over the next year imply a continuation of recent changes, not a reversal. Third, COVID-19 shifted relative employment growth trends in favor of industries with a high capacity of employees to work from home and against those with a low capacity.

JEL classification: D22, D84, E23, E24, J21, J62, J63

Key words: COVID-19, reallocation shock, business expectations, working from home, Survey of Business Uncertainty

The authors thank Stanford University, the University of Chicago Booth School of Business, ITAM, and the Federal Reserve Bank of Atlanta for financial support. The views expressed here are those of the authors and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Brent Meyer, Federal Reserve Bank of Atlanta, 1000 Peachtree Street NE, Atlanta, GA 30309.

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