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You're (not) Hired: Artificial Intelligence and Early Career Hiring in the Quarterly Workforce Indicators
April 2026
Working Paper Number:
CES-26-27
Using detailed tabulations from matched employer-employee administrative data, I document evidence of an immediate, sizable, and persistent decrease in the level of early career (22-24 year old) hires following introduction of ChatGPT within the industry-state cells that are most exposed to AI. The decline in hires is the primary cause of large observed declines in employment over the subsequent period. Regressionadjusted employment of early career workers in the most AI-exposed quintile of industry-state cells declined by 12% over the 10 quarters following the introduction of ChatGPT, even as employment in lessexposed industries has remained stable. The rate of hiring largely recovered by early 2025, attributable to a smaller employment base. Earnings growth of early career workers in the most exposed industries slowed slightly relative to those in less exposed industries. Although the most AI-exposed quintile of detailed industries is dominated by a handful of industry sectors, I find that the association of higher AI exposure with reduced early career employment and fewer hires is observed across most sectors of the economy. Timing of effects in event studies is consistent with an immediate effect on hiring following introduction of ChatGPT. However, triple difference estimates provide some evidence of earlier trend shifts on employment, hiring, and separations around the onset of the COVID pandemic. I discuss potential explanations, including the increase in remote work and increased educational attainment among workers in AI-exposed occupations. Nonetheless, job gains to early career workers and backfill hires show evidence of discontinuous decline at the time of ChatGPT's release in comparison to older workers in the same industries. A local projections analysis at the NAICS industry group level shows that industries with high AI exposure are not particularly sensitive to unexpected fluctuations in monetary policy on average relative to other industries in employment, hiring, or separations. A historical decomposition suggests that up to one quarter of relative early career employment declines through 2025q2 may be attributable to monetary policy shocks through 2023, but the analysis does not find evidence that these shocks can explain the rapid decline in hires at the most AI-exposed firms in comparison to others.
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The Microstructure of AI Diffusion: Evidence From Firms, Business Functions, and Worker Tasks
April 2026
Working Paper Number:
CES-26-25
Using novel, nationally representative data from the 2026 AI supplement to the U.S. Census Bureau's Business Trends and Outlook Survey (BTOS), we characterize AI diffusion across three interconnected layers: overall firm use, deployment across business functions, and worker-task use. This multi-layered approach provides a nuanced picture of business AI adoption. During the supplement reference period (Nov 2025-Jan 2026), 18% of firms used AI in a business function, rising to 32% on an employment-weighted basis; adoption is expected to reach 22% within six months. AI use is substantially higher in large firms and knowledge-intensive sectors, with use rates reaching 50%-60% (60%-70%, employment-weighted) for very large firms in the Information, Professional Services, and Finance sectors. Among adopting firms, the scope of use remains limited: 57% of users integrate AI in three or fewer business functions, most commonly Sales and Marketing (52%), Strategy and Business Development (45%), and IT (41%). In 23% (41%, employment-weighted) of firms, workers use AI in work-related tasks. Writing, document analysis, and information search are the leading Generative AI use in tasks, though 65% of firms limit use to three or fewer tasks. The evidence points to both top-down and bottom-up diffusion channels: worker task use sometimes occurs without formal firm-level adoption, and firm-level adoption sometimes occurs without worker task use. Most users (66%) rely on AI solely to augment tasks, while AI-related employment decreases are rare, occurring in only 2% of firms. Regression analysis shows a robust positive correlation between firm commercial performance and the breadth of AI integration, including functional deployment, task-level use, and operational investment. A distinct divergence emerges, however, with respect to labor outcomes. Functional breadth and operational investment are positively associated with employment decreases, whereas worker-task integration shows no significant link to headcount reduction once functional integration and operational investment are taken into account.
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The Role of Homophily in Response to Labor Market Opportunities: Differences Across Race and Ethnicity
March 2026
Working Paper Number:
CES-26-22
This paper investigates the role that homophily might play in explaining racial/ethnic disparities in the labor market. We find that Black and Hispanic workers are less responsive than White workers to changes in job opportunities, but responsiveness increases when those opportunities present themselves in locations with a higher share own-race population. The analysis makes use of restricted American Community Survey data, accessible through the Federal Statistical Research Data Centers, allowing us to include commuting zones that may otherwise not be identified because of suppressed location information in the public data
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A Shock by Any Other Name? Reconsidering the Impacts of Local Demand Shocks
February 2026
Working Paper Number:
CES-26-10
Over the last decade, research on labor market adjustment following local demand shocks has expanded to explore a wide variety of measured shocks. However, the worker adjustments observed in response to these shocks are not always consistent across studies. We create a harmonized set of annual commuting-zone-level shocks following the major approaches in the literature to investigate these differences. As one might expect, shocks of different types exhibit different geographic and temporal patterns and are generally weakly correlated with each other. We find they also generate different employment and migration responses, with trade-related shocks showing little response on either margin, while more general Bartik-style shocks are associated with economically meaningful changes in both employment and migration.
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Borrowing Constraints, Markups, and Misallocation
December 2025
Working Paper Number:
CES-25-75
We document new facts that link firms' markups to borrowing constraints: (1) less constrained firms within an industry have higher markups, especially in industries where assets are difficult to borrow against and firms rely more on earnings to borrow; (2) markup dispersion is also higher in industries where firms rely more on earnings to borrow. We explain these relationships using a standard Kimball demand model augmented with borrowing against assets and earnings. The key mechanism is a two-way feedback between markups and borrowing constraints. First, less constrained firms charge higher markups, as looser constraints allow them to attain larger market shares. Second, higher markups relax borrowing constraints when firms rely on earnings to borrow, as those with higher markups have higher earnings. This two-way feedback lowers TFP losses from markup dispersion, particularly when firms rely on earnings to borrow.
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Parental Death, Inheritance, and Labor Supply in the United States
December 2025
Working Paper Number:
CES-25-71
We are the first to study how inheritances affect labor supply in the U.S. using large-scale administrative data. Leveraging federal tax and Social Security records, we estimate event studies around parental death to investigate impacts on adult children. Our results indicate that the death of a last parent causes sizable gains in investment income'our main proxy for inheritances'and proportionate reductions in labor supply. On average, annual per-adult investment income at the tax unit level increases by about $300 (45 percent) and annual per-adult wage earnings decrease by $600 (2 percent). These earnings responses are large relative to the implied wealth transfer. Income effects are the dominant channel through which parental death reduces earnings, with children of wealthier parents exhibiting larger earnings reductions. Over six years, inheritances slightly equalize the distribution of investment income.
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Housing Capital and Intergenerational Mobility in the United States
August 2025
Working Paper Number:
CES-25-55
Housing represents the most important capital asset for most U.S. families. Despite substantial analysis of the intergenerational mobility of income, large gaps in our knowledge of the distribution of housing assets and their transmission over time remain, as housing is generally not reflected by income flows. Using novel linked data that combines survey responses with administrative tax data and information on ownership and valuation from property tax records for over 3.4 million families, we provide new evidence on the intergenerational transmission of housing capital. We find that housing capital is more persistent across generations than labor income. We document important disparities between average housing outcomes for White and Black children. These difference persist even conditional on parent rank in the distribution of housing assets, with the gap growing throughout the parental housing capital distribution. A decomposition shows that average differences in children's labor market outcomes associated with parental assets explain about half of the observed intergenerational persistence (a 'labor income channel'), and that there is also a substantial 'direct channel' ' conditional on children having the same earnings, children of parents with more housing assets have more assets themselves on average. The direct channel is also important for explaining the intergenerational gap in outcomes of Black and White children. Finally, we present quasi-experimental evidence that local housing supply constraints help explain spatial differences in intergenerational persistence across US counties. Our results establish the importance of housing markets, both independently from and jointly with labor markets, in shaping the intergenerational persistence of economic resources.
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Credit Access in the United States
July 2025
Working Paper Number:
CES-25-45
We construct new population-level linked administrative data to study households' access to credit in the United States. These data reveal large differences in credit access by race, class, and hometown. By age 25, Black individuals, those who grew up in low-income families, and those who grew up in certain areas (including the Southeast and Appalachia) have significantly lower credit scores than other groups. Consistent with lower scores generating credit constraints, these individuals have smaller balances, more credit inquiries, higher credit card utilization rates, and greater use of alternative higher-cost forms of credit. Tests for alternative definitions of algorithmic bias in credit scores yield results in opposite directions. From a calibration perspective, group-level differences in credit scores understate differences in delinquency: conditional on a given credit score, Black individuals and those from low-income families fall delinquent at relatively higher rates. From a balance perspective, these groups receive lower credit scores even when comparing those with the same future repayment behavior. Addressing both of these biases and expanding credit access to groups with lower credit scores requires addressing group-level differences in delinquency rates. These delinquencies emerge soon after individuals access credit in their early twenties, often due to missed payments on credit cards, student loans, and other bills. Comprehensive measures of individuals' income profiles, income volatility, and observed wealth explain only a small portion of these repayment gaps. In contrast, we find that the large variation in repayment across hometowns mostly reflects the causal effect of childhood exposure to these places. Places that promote upward income mobility also promote repayment and expand credit access even conditional on income, suggesting that common place-level factors may drive behaviors in both credit and labor markets. We discuss suggestive evidence for several mechanisms that drive our results, including the role of social and cultural capital. We conclude that gaps in credit access by race, class, and hometown have roots in childhood environments.
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An Anatomy of U.S. Establishments' Trade Linkages in Global Value Chains
June 2025
Working Paper Number:
CES-25-44
Global value chains (GVC) are a pervasive feature of modern production, but they are hard to measure. Using confidential microdata from the U.S. Census Bureau, we develop novel measures of the linkages between U.S. manufacturing establishments' imports and exports. We find that for every dollar of exports, imported inputs represent 13 cents in 2002 and 20 cents by 2017. Examining GVC trade flows in a gravity framework, we find that these flows are higher within 'round-trip' (input and output market is the same) linkages, regional trade agreements, and multinational firm boundaries. The strong complementarities between input and output markets are muted by the proportionality assumptions embedded in global input-output tables. Finally, with an off-the-shelf model, we show the round-trip results can be obtained when firm-specific sourcing and exporting fixed costs are linked.
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Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation
June 2025
Working Paper Number:
CES-25-37
We measure the real effects of private equity buyouts on worker outcomes by building a new database that links transactions to matched employer-employee data in the United States. To guide our empirical analysis, we derive testable implications from three theories in which private equity managers alter worker outcomes: (1) exertion of monopsony power in concentrated markets, (2) breach of implicit contracts with targeted groups of workers, including managers and top earners, and (3) efficient reallocation of workers across plants. We do not find any evidence that private equity-backed firms vary wages and employment based on local labor market power proxies. Wage losses are also very similar for managers and top earners. Instead, we find strong evidence that private equity managers downsize less productive plants relative to productive plants while simultaneously reallocating high-wage workers to more productive plants. We conclude that post-buyout employment and wage dynamics are consistent with professional investors providing incentives to increase productivity and monitor the companies in which they invest.
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