The Fed – Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context

October 2020

Business Exit During the COVID-19 Pandemic: Non-Traditional Measures in Historical Context

Leland D. Crane, Ryan A. Decker, Aaron Flaaen, Adrian Hamins-Puertolas, & Christopher Kurz

Abstract:

Given lags in official data releases, economists have studied “alternative data” measures of business exit resulting from the COVID-19 pandemic. Such measures are difficult to understand without historical context, so we review official data on business exit in recent decades. Business exit is common in the U.S., with about 7.5 percent of firms exiting annually in recent years, & is countercyclical (particularly recently). Both the high level & the cyclicality of exit are driven by very small firms. We explore a range of alternative measures & indicators of business exit, including novel measures based on payroll events & phone-tracking data, & find tentative evidence that exit has been elevated during 2020. Evidence is somewhat mixed, however, & exiting businesses do not appear to represent a large share of U.S. employment.

DOI: https://doi.org/10.17016/FEDS.2020.089

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