Locate Your Nearest Exit: Mass Layoffs and Local Labor Market Response

Andrew Foote, University of California, Davis
Michel Grosz, University of California, Davis
Ann H. Stevens, University of California, Davis

Large shocks to local labor markets cause lasting changes to communities and their residents. In this paper, we examine four main components through which individuals exit the local labor force following large labor demand shocks: in-migration, out-migration, retirement, and enrollment in disability insurance. First, we document the magnitude of the response through these channels after a mass layoff event showing that, primarily through migration, they account for roughly three-fourths of labor force reductions. Additionally, we explore the residual difference between these channels and the labor force change, which we argue is due to labor force non-participation by individuals. We find that this residual is larger in the period following the Great Recession, which highlights the growing importance of non-participation as a response to labor demand shocks. Finally, we find evidence that mass layoff events cause individuals to undertake long-distance migration rather than migration to adjacent counties.