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August 6, 2025

Uneven sectoral dynamics of the COVID-19 recession

The pandemic reorganized the US business sector, creating clear economic winners and losers.

Tyler Smith

Source: Nach-Noth

When COVID-19 struck, it threw the United States into a recession and significantly disrupted numerous industries. Airlines billions of dollars and restaurants shuttered by the thousands as people stayed home to avoid the contagion. But a few fortunate companies managed to thrive. Amazon's soared and Zoom became a household name.

In a paper in the 蝌蚪网 Journal: Macroeconomics, authors and document the extent of reorganization in the US business sector and show that the gap between winners and losers persisted for years.

The researchers drew their conclusions from firm-level revenue data and stock market prices. They sorted US firms into a “contact” sector—market activity exposed to the virus—and a “noncontact” sector. They then used stock market reactions to COVID news in early 2020 to identify which companies were winners and which were losers. 

Figure 3 from the authors’ paper shows the real revenue of firms broken down by sector from early 2020 through late 2022.

from Cirelli and Gertler (2025)

The chart plots the log-distance from the trend revenues of firms, which helps to capture genuine COVID impacts rather than ongoing business trends.

The purple line shows the performance of the overall contact sector, which combines winners and losers. The yellow line represents the non-contact sector, which includes businesses less affected by social distancing. The black line indicates the performance of the total economy.

The detrended revenue of the pandemic losers within the contact sector—indicated by the red line—plummets to negative 33 percent in the second quarter of 2020. The losing firms included businesses like airlines, hotels, restaurants, and cruise lines, which require face-to-face interaction. Even by late 2022, losing firms remained significantly below their pre-pandemic trends.

Meanwhile, the revenue of the pandemic winners within the contact sector—indicated by the blue line—rose throughout the crisis, peaking at 12 percent above trend by late 2020. Within the contact sector, the winning firms included companies like Amazon, Zoom, Netflix, and food delivery services that offered safer substitutes to traditional in-person businesses.

The authors use a model to argue that these sectoral reallocations were driven by substitution behaviors that may have amplified the overall downturn in economic activity and subsequent inflation.