Trade Policy Uncertainty and the Labor Market: State-Level Evidence

This paper provides US state-level evidence regarding the effects of trade policy uncertainty on the labor market. We show that a higher exposure to trade policy uncertainty generates a contraction in total hours worked at the state level. The extensive margin of labor is the primary margin of employment adjustment. State-level employment is more strongly impacted by trade policy uncertainty in goods-producing industries, and more particularly in the durable goods industry. States that are more specialized in goods industries, when they face higher uncertainty, tend to postpone hiring by more, which explains the drop in total employment.