IMF Working Papers

Oil Shocks and Labor Market Developments

By Diego B. P. Gomes, Lisa L Kolovich, Hannah Yi Wei

July 18, 2025

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Format: Chicago

Diego B. P. Gomes, Lisa L Kolovich, and Hannah Yi Wei. "Oil Shocks and Labor Market Developments", IMF Working Papers 2025, 145 (2025), accessed July 19, 2025, https://doi.org/10.5089/9798229018128.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper examines how oil shocks shape labor market outcomes across 89 countries from 1975 to 2022. Leveraging a high-frequency oil supply shock series and a rich panel of quarterly labor market data, we find that shocks raising oil prices trigger sharp and persistent employment losses, particularly in oil-importing countries, oil-intensive sectors, and among male workers. Delayed but enduring employment declines also emerge in oil-moderate sectors and among female workers, revealing broader labor market implications. In contrast, employment gains in oil-exporting countries, and following expansionary supply shocks, are comparatively modest. Labor force participation responds less consistently, with patterns displaying higher variability. These findings highlight how oil shocks transmit unevenly through labor markets, with lasting impacts across countries, sectors, and demographic groups, extending well beyond short-term macroeconomic fluctuations.

Subject: Commodities, Economic theory, Employment, Employment rate, Labor, Labor force participation, Labor markets, Oil, Oil prices, Oil production, Prices, Production, Supply shocks, Unemployment

Keywords: Bank of England, Cross-country labor adjustment, Employment, Employment heterogeneity, Employment rate, Global, High-frequency identification, Interim surveillance review, Labor force participation, Labor market, Labor markets, Oil, Oil exports, Oil prices, Oil production, Oil supply shocks, Organisation for Economic Co-operation and Development, Supply shocks, Unemployment, Unemployment rate

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