The Post‑COVID Decline in the Labor Share

Federal Reserve Bank

Richard Audoly

Article

6 Pages

The Federal Reserve Bank of New York examines why the U.S. labor share has fallen to a post-war low after COVID. The authors find the decline is not mainly about workers shifting across industries, but about payroll shares falling within industries, a pattern that also appeared after the 1999–2004 and 2007–2012 downturns.

Key Takeaways

Labor share fell: The U.S. labor share dropped 1.6 percentage points below its pre-pandemic level, reaching its lowest post-war reading.
Reallocation faded: The 2019–2024 reallocation spike moderated quickly, unlike the more persistent increases after the 1999–2004 and 2007–2012 recessions.
Industries drove decline: Across 1999–2004, 2007–2012, and 2019–2024, payroll-share declines were driven almost entirely by within-industry changes.
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