Understanding the Economic Impact of COVID-19 Stay-at-Home Orders: A Synthetic Control Analysis

There is an ongoing debate in the U.S. regarding the costs and benefits associated with statewide stay-at-home orders that were enacted in response to the COVID-19 outbreak. Many opponents of such orders claim that the economic cost, in terms of higher unemployment, may in-fact outweigh the health benefits of such policies. In this paper, we use synthetic control analysis to determine the impact of stay-at-home orders on weekly new jobless claims. Our analysis reveals that while new jobless claims spike following stay-at-home orders, similar spikes, albeit of a lower magnitude, are also observed within our synthetic control. This finding suggests that other factors outside of the policy, such as the spread of the virus and a general waning of consumer confidence, contribute significantly to the observed increase in new jobless claims.