Using data from the Annual Survey of Manufactures (ASM) and the Census of Manufacturing (CMF), we construct quarterly measures of job creation and destruction by 3-digit NAICS industries spanning from 1980Q3-2016Q4. These long series allow us to address three questions regarding the effect of oil news shocks. What is the average effect of oil news shocks on sectoral labor reallocation? What characteristics explain the observed heterogeneity in the average responses across industries? Has the response of US manufacturing changed over time? We find evidence that oil news shocks exert only a moderate effect on total manufacturing net employment growth but lead to a significant increase in job reallocation. However, we find a high degree of heterogeneity in responses across industries. We then show that the cross-industry variation in the sensitivity of net employment growth and excess job reallocation to oil news shocks is related to differences in energy costs, the rate of energy to capital expenditures, and the share of mature firms in the industry. Finally, we illustrate how the dynamic response of sectoral job creation and destruction to oil news shocks has declined since the mid-2000s.
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Import Competition and Firms' Internal Networks
September 2021
Working Paper Number:
CES-21-28
Using administrative data on U.S. multisector firms, we document a cross-sectoral propagation of the import competition from China ('China shock') through firms' internal networks: Employment of an establishment in a given industry is negatively affected by China shock that hits establishments in other industries within the same firm. This indirect propagation channel impacts both manufacturing and non-manufacturing establishments, and it operates primarily through the establishment exit. We explore a range of explanations for our findings, highlighting the role of within-firm trade across sectors, scope of production, and establishment size. At the sectoral aggregate level, China shock that propagates through firms' internal networks has a sizable impact on industry-level employment dynamics.
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Supply Chain Adjustments to Tariff Shocks: Evidence from Firm Trade Linkages in the 2018-2019 U.S. Trade War
August 2024
Working Paper Number:
CES-24-43
We use the 2018-2019 U.S. trade war to examine how supply chains adjustments to a tariff cost shock affect imports and exports. Using confidential firm-trade linked data, we show that the decline in imports of tariffed goods was driven by discontinuations of U.S. buyer'foreign supplier relationships, reduced formation of new relationships, and exits by U.S. firms from import markets altogether. However, tariffed products where imports were concentrated in fewer suppliers had a smaller decline in import growth. We then construct measures of export exposure to import tariffs by linking tariffs paid by importing firms to their exported products. We find that the most exposed products had lower exports in 2018-2019, with most of the impact occurring in 2019.
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Who's Most Exposed to International Shocks? Estimating Differences in Import Price Sensitivity across U.S. Demographic Groups
March 2023
Working Paper Number:
CES-23-13R
Differences in consumption patterns across demographic groups mean that international price shocks differentially affect such groups. We construct import price indexes for U.S. households that vary by age, race, marital status, education, and urban status. Black households and urban households experienced significantly higher import price inflation from 1996-2018 compared to other groups, such as white households and rural households. Sensitivity to international price shocks varies widely, implying movements in exchange rates and foreign prices, both during our sample and during the Covid-19 pandemic, drove sizable differences in import price inflation ' and total inflation ' across households.
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The Dynamics of Plant-Level Productivity in U.S. Manufacturing
July 2006
Working Paper Number:
CES-06-20
Using a unique database that covers the entire U.S. manufacturing sector from 1976 until 1999, we estimate plant-level total factor productivity for a large number of plants. We characterize time series properties of plant-level idiosyncratic shocks to productivity, taking into account aggregate manufacturing-sector shocks and industry-level shocks. Plant-level heterogeneity and shocks are a key determinant of the cross-sectional variations in output. We compare the persistence and volatility of the idiosyncratic plant-level shocks to those of aggregate productivity shocks estimated from aggregate data. We find that the persistence of plant level shocks is surprisingly low-we estimate an average autocorrelation of the plantspecific productivity shock of only 0.37 to 0.41 on an annual basis. Finally, we find that estimates of the persistence of productivity shocks from aggregate data have a large upward bias. Estimates of the persistence of productivity shocks in the same data aggregated to the industry level produce autocorrelation estimates ranging from 0.80 to 0.91 on an annual basis. The results are robust to the inclusion of various measures of lumpiness in investment and job flows, different weighting methods, and different measures of the plants' capital stocks.
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Business Dynamics Statistics for Single-Unit Firms
December 2022
Working Paper Number:
CES-22-57
The Business Dynamics Statistics of Single Unit Firms (BDS-SU) is an experimental data product that provides information on employment and payroll dynamics for each quarter of the year at businesses that operate in one physical location. This paper describes the creation of the data tables and the value they add to the existing Business Dynamics Statistics (BDS) product. We then present some analysis of the published statistics to provide context for the numbers and demonstrate how they can be used to understand both national and local business conditions, with a particular focus on 2020 and the recession induced by the COVID-19 pandemic. We next examine how firms fared in this recession compared to the Great Recession that began in the fourth quarter of 2007. We also consider the heterogenous impact of the pandemic on various industries and areas of the country, showing which types of businesses in which locations were particularly hard hit. We examine business exit rates in some detail and consider why different metro areas experienced the pandemic in different ways. We also consider entry rates and look for evidence of a surge in new businesses as seen in other data sources. We finish by providing a preview of on-going research to match the BDS to worker demographics and show statistics on the relationship between the characteristics of the firm's workers and outcomes such as firm exit and net job creation.
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Cyclical Reallocation of Workers Across Employers by Firm Size and Firm Wage
June 2015
Working Paper Number:
CES-15-13
Do the job-to-job moves of workers contribute to the cyclicality of employment growth at different types of firms? In this paper, we use linked employer-employee data to provide direct evidence on the role of job-to-job flows in job reallocation in the U.S. economy. To guide our analysis, we look to the theoretical literature on on-the-job search, which predicts that job-to-job flows should reallocate workers from small to large firms. While this prediction is not supported by the data, we do find that job-to-job moves generally reallocate workers from lower paying to higher paying firms, and this reallocation of workers is highly procyclical. During the Great Recession, this firm wage job ladder collapsed, with net worker reallocation to higher wage firms falling to zero. We also find that differential responses of net hires from non-employment play an important role in the patterns of the cyclicality of employment dynamics across firms classified by size and wage. For example, we find that small and low wage firms experience greater reductions in net hires from non-employment during periods of economic contractions.
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The Cyclicality of Productivity Dispersion
May 2011
Working Paper Number:
CES-11-15
Using plant-level data, I show that the dispersion of total factor productivity in U.S. durable manufacturing is greater in recessions than in booms. This cyclical property of productivity dispersion is much less pronounced in non-durable manufacturing. In durables, this phenomenon primarily reflects a relatively higher share of unproductive firms in a recession. In order to interpret these findings, I construct a business cycle model where production in durables requires a fixed input. In a boom, when the market price of this fixed input is high, only more productive firms enter and only more productive incumbents survive, which results in a more compressed productivity distribution. The resulting higher average productivity in durables endogenously translates into a lower average relative price of durables. Additionally, my model is consistent with the following business cycle facts: procyclical entry, procyclical aggregate total factor productivity, more procyclicality in durable than non-durable output, procyclical employment and countercyclicality in the relative price of durables and the cross section of stock returns.
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Outsourcing Dynamism
December 2023
Working Paper Number:
CES-23-64
This paper investigates the increasing importance of domestic outsourcing in U.S. manufacturing. Under domestic outsourcing, the agency is the employer of record for temporary workers, though they perform their tasks at the client business' premises. On a yearly basis, one in two manufacturing plants hires at least some of its workers through a temporary help agency. Furthermore, domestic outsourcing is becoming increasingly more important: the average share of revenue spent on such arrangements has gone up by 85 percent since 2006. We develop a methodology to transform reported expenses on temporary and leased workers into plant-level outsourced employment counts, using administrative data on the U.S. manufacturing sector. We find that domestic outsourcing is an important margin of adjustment that plants use to modify their workforce in response to productivity shocks. Plant-level outsourced employment adjusts more quickly and is twice as responsive as payroll employment. These micro implications have significant aggregate consequences. Without taking reallocations in outsourced employment into account, the measured pace at which jobs reallocate across workplaces is underestimated. On average, we omit the equivalent of 15 percent of payroll employment reallocations in each year. However, outsourced employment churns at a much higher rate compared to its payroll counterpart. Therefore, the omission of outsourced reallocations can rationalize 37 percent of the secular decline in the aggregate job reallocation rate. Lastly, the extent of mismeasurement varies with the business cycle; falling in downturns and increasing in upturns implying that the speed of economic recovery is underestimated.
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Firm Dynamics, Persistent Effects of Entry Conditions, and Business Cycles
January 2017
Working Paper Number:
CES-17-29
This paper examines how the state of the economy when businesses begin operations affects
their size and performance over the lifecycle. Using micro-level data that covers the entire universe of businesses operating in the U.S. since the late 1970s, I provide new evidence that businesses born in downturns start on a smaller scale and remain smaller over their entire lifecycle. In fact, I find no evidence that these differences attenuate even long after entry. Using new data on the productivity and composition of startup businesses, I show that this persistence is related to selection at entry and demand-side channels.
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Firm Leverage, Labor Market Size, and Employee Pay
August 2018
Working Paper Number:
CES-18-36
We provide new estimates of the wage costs of firms' debt using an empirical approach that exploits within-firm geographical variation in workers' expected unemployment costs due to variation in local labor market in a large sample of public firms. We find that, following an increase in firm leverage, workers with higher unemployment costs experience higher wage growth relative to workers at the same firm with lower unemployment costs. Overall, our estimates suggest wage costs are an important component in the overall cost of debt, but are not as large as implied by estimates based on ex post employee wage losses due to bankruptcy; we estimate that a 10 percentage point increase in firm leverage increases wage compensation for the median worker by 1.9% and total firm wage costs by 17 basis points of firm value.
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