Of clerks & cleaners: the heterogeneous impact of monetary policy on the US labor market

In this paper we estimate the effect of monetary policy on the US labor market using disaggregated data based on large scale micro surveys. By employing a Bayesian factor-augmented vector autoregression framework, we investigate the impact of an unanticipated interest rate change on the unemployment rate in 32 occupation groups. Our results on the aggregate level are in line with the literature and point towards a strong influence of monetary policy on economic activity, overall unemployment and investment. A closer look on the disaggregated level reveals heterogeneous impacts across occupation groups. This heterogeneity can partially be explained by the amount of routine tasks and the degree of offshorability of an particular occupation group. These results suggest that workers who are highly vulnerable to medium-term and long-term developments such as automatization and offshoring are also hit disproportionately hard by short-term economic fluctuations.