The Effect of Reserve Activations and Active-Duty Deployments on Local Employment during the Global War on Terrorism

The ongoing Global War on Terrorism has resulted in the largest deployment of American service personnel since the Vietnam War. Large numbers of active-duty forces have been deployed overseas; large numbers of reservists have been activated and deployed overseas as well. These activations and deployments have stimulated concerns about their effect on the local economies in which active-duty forces are stationed and in which reservists live in peacetime. This report presents an econometric analysis of the impact of activations and deployments on local economic conditions as measured by changes in local employment. We begin by noting that the overall effect of activations and deployments on total U.S. employment cannot be large. The U.S. economy employs about 126 million workers. The number of reservists activated or deployed from U.S. counties for Global War on Terrorism contingencies in a given month peaked in 2003 at about 160,000, which represents roughly 0.13 percent of the U.S. workforce. If we add in deployed active-duty personnel at their monthly peak in 2003 (about 140,000), activated and deployed personnel represented, at most, 0.20 percent of the U.S. workforce during our study period (2001 2004). However, active-duty forces are concentrated on a relatively small number of military bases, and reserve units, by nature, are geographically concentrated. Thus, even though the national effect of deployment and activation is likely to be small, it is possible that the effect on some firms and communities is much larger. Some employers might have trouble replacing activated reserve personnel in the short run, leading to declines in output and profitability. And, in some communities, the absence of activated reserve and deployed active-duty personnel could depress local demand for goods and services.