German Labor Market is Locally Resilient

Even in times of a flourishing economy, as in the ten years before the outbreak of the Corona pandemic, there are always localized slumps in the labor market, for example due to the insolvency of a large local company or a plant closure. We use these slumps, measured by the increase in local unemployment, to investigate how quickly regional labor markets in Germany recover. Our results show that the German labor market is resilient in good times. Even large local labor market shocks hardly increase unemployment and are fully levelled out after eight months.