Demand‐Driven Propagation of Job Losses: Evidence from the Great Recession a

This paper presents evidence for the demand‐driven propagation of job losses in the context of the United States during the Great Recession. Using county‐level tradable job losses driven by aggregate shocks as an instrument, it shows that retail and restaurant (R&R) employment fell by 0.37% for every 1% of job loss in the rest of the county's economy. The finding is not driven by the house price decline or by credit supply problems. Moreover, the spillover is more severe for R&R industries that are most affected by consumer demand shocks during the Great Recession, which strengthens the argument for the demand‐driven propagation of job losses.