Early evidence of the impacts of COVID-19 on minority unemployment

Abstract

This paper provides early evidence of the impacts of the COVID-19 pandemic on minority unemployment in the United States. In the first month following March adoptions of social distancing measures by states, unemployment rose to 14.5% but a much higher 24.4% when we correct for potential data misclassification noted by the BLS. Using the official definition, unemployment in April 2020 among African-Americans rose by less than what would have been anticipated (to 16.6%) based on previous recessions, and the long-term ordering of unemployment across racial/ethnic groups was altered with Latinx unemployment (18.2%) rising for the first time to the highest among major groups. Difference-in-difference estimates confirm that the initial gap in unemployment between whites and blacks in April was not different than in periods prior to the pandemic; however, the racial gap expanded as unemployment for whites declined in the next two months but was largely stagnant for blacks. The initially large gap in unemployment between whites and Latinx in April was sustained in May and June as unemployment declined similarly for both groups. Non-linear decompositions show a favorable industry distribution partly protected black employment during the early stages of the pandemic, but that an unfavorable occupational distribution and lower average skills levels placed them at higher risk of job losses. An unfavorable occupational distribution and lower skills contributed to a sharply widened Latinx-white unemployment gap that moderated over time as rehiring occurred. These findings of disproportionate impacts on minority unemployment raise important concerns regarding lost earnings and wealth, and longer-term consequences of the pandemic on racial inequality in the United States.