This paper studies how U.S. local labor markets respond to employment losses after recessions. Following each recession between 1973 and 2009, we find that areas that lose more jobs during the recession experience persistent relative declines in employment and population. Most importantly and contrary to prior work, these local labor markets also experience persistent decreases in the employment-population ratio and per capita earnings. Our results imply that limited population responses result in longer-lasting consequences for local labor markets than previously thought, and that recessions are followed by persistent reallocation of employment across space.
The Evolution of Local Labor Markets After Recessions
WP 22-16 – Local areas that have more severe employment losses during recessions experience highly persistent declines in employment, population, employment-to-population ratios, and earnings per capita.