The COVID-19 pandemic brought with it a massive shock to the labor market, as many businesses have either shut down or experienced a drastic shift in demand. However, the picture may not be as bleak as it looks at first glance, says Chicago Booth’s Matthew J. Notowidigdo. Breaking down the headline unemployment figure, he finds that permanent layoffs have remained well below levels they reached during the 2008-09 financial crisis, job vacancies have recovered well, and temporarily laid off workers are being reemployed at high rates. These indicators, he says, suggest an encouraging trajectory for the unemployment picture over the coming months.

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