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The cyclical sensitivity of seasonality in US employment

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  • S. Krane
  • W. Wascher

Abstract

There is a growing recognition in the literature on business cycles that production technologies may give rise to complicated interactions between seasonal and cyclical movements in economic time series, which can distort business cycle inference based on seasonally adjusted data. For the most part, however, the empirical research in this area has relied on standard univariate seasonal adjustment techniques that provide only a partial description of such interactions. In this paper, we develop an unobserved components model that explicitly accounts for the effects of business cycles on industry-level seasonality and for the potential feedback from seasonality to the aggregate business cycle. In particular, the model extracts an aggregate "common cycle" from industry-level data, allows formal statistical testing of seasonal differences in the comovement of an industry with the common cycle, and identifies economy-wide and industry-specific contributions to the seasonal and non-seasonal variation in the data. Applying the model to quarterly US payroll employment data, we frequently find evidence of statistically significant differences across seasons in the comovement between sectoral employment and the common cycle. On the other hand, we also find that seasonal fluctuations in employment at the industry level are largely idiosyncratic and that the proportion of the total variance of the common cycle accounted for by seasonality is much less than for aggregate employment. This suggests that seasonal shocks may have less of a business cycle element to them than one might infer from the seasonal movements in aggregate variables.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 67.

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Length: 38 pages
Date of creation: May 1999
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Handle: RePEc:bis:biswps:67

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  1. Hylleberg, S. & Engle, R. F. & Granger, C. W. J. & Yoo, B. S., 1990. "Seasonal integration and cointegration," Journal of Econometrics, Elsevier, Elsevier, vol. 44(1-2), pages 215-238.
  2. James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
  3. Canova, F. & Ghysels, E., 1992. "Changes in Seasonal Patters: Are They Cyclical," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 9216, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  4. Bell, William R & Hillmer, Steven C, 1984. "Issues Involved with the Seasonal Adjustment of Economic Time Series," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 2(4), pages 291-320, October.
  5. Ruud, Paul A., 1991. "Extensions of estimation methods using the EM algorithm," Journal of Econometrics, Elsevier, Elsevier, vol. 49(3), pages 305-341, September.
  6. Breusch, T S & Pagan, A R, 1980. "The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(1), pages 239-53, January.
  7. Krane, Spencer D., 1993. "Induced seasonality and production-smoothing models of inventory behavior," Journal of Econometrics, Elsevier, Elsevier, vol. 55(1-2), pages 135-168.
  8. Plosser, Charles I., 1979. "The analysis of seasonal economic models," Journal of Econometrics, Elsevier, Elsevier, vol. 10(2), pages 147-163, June.
  9. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(3), pages 503-34, June.
  10. Ghysels, E., 1991. "Are Business Cycle Turning Points Uniformly Distributed Throughout the Year?," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9135, Universite de Montreal, Departement de sciences economiques.
  11. Stephen G. Cecchetti & Anil K. Kashyap & David W. Wilcox, 1997. "Interactions between the seasonal and business cycles in production and inventories," Working Paper Series, Macroeconomic Issues WP-97-06, Federal Reserve Bank of Chicago.
  12. Beaulieu, J Joseph & MacKie-Mason, Jeffrey K & Miron, Jeffrey A, 1992. "Why Do Countries and Industries with Large Seasonal Cycles also Have Large Business Cycles?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 621-56, May.
  13. Charles I. Plosser, 1979. "A Time Series Analysis of Seasonality in Econometric Models," NBER Chapters, in: Seasonal Analysis of Economic Time Series, pages 365-410 National Bureau of Economic Research, Inc.
  14. David A. Pierce & William P. Cleveland, 1981. "Seasonal adjustment methods for the monetary aggregates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 875-887.
  15. Watson, Mark W. & Engle, Robert F., 1983. "Alternative algorithms for the estimation of dynamic factor, mimic and varying coefficient regression models," Journal of Econometrics, Elsevier, Elsevier, vol. 23(3), pages 385-400, December.
  16. Ghysels, Eric & Lee, Hahn S. & Noh, Jaesum, 1994. "Testing for unit roots in seasonal time series : Some theoretical extensions and a Monte Carlo investigation," Journal of Econometrics, Elsevier, Elsevier, vol. 62(2), pages 415-442, June.
  17. Kenneth F. Wallis, 1978. "Seasonal Adjustment and Multiple Time Series Analysis," NBER Chapters, in: Seasonal Analysis of Economic Time Series, pages 347-364 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Casey B. Mulligan, 2010. "Does Labor Supply Matter During a Recession? Evidence from the Seasonal Cycle," NBER Working Papers 16357, National Bureau of Economic Research, Inc.
  2. Marcelo Veracierto, 2005. "Seasonal monetary policy," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 49-68.
  3. Matas-Mir, Antonio & Osborn, Denise R., 2004. "Does seasonality change over the business cycle? An investigation using monthly industrial production series," European Economic Review, Elsevier, vol. 48(6), pages 1309-1332, December.
  4. Miron, Jeffrey A & Beaulieu, J Joseph, 1996. "What Have Macroeconomists Learned about Business Cycles form the Study of Seasonal Cycles?," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 54-66, February.
  5. Stephen Bazen & Velayoudom Marimoutou, 2000. "Looking for a Needle in a Haystack? A Structural Time Series Model of the Relationship Between Teenage Employment and Minimum Wages in the United States," Econometric Society World Congress 2000 Contributed Papers 0495, Econometric Society.
  6. A Matas-Mir & D R Osborn, 2003. "Seasonal Adjustment and the Detection of Business Cycle Phases," Centre for Growth and Business Cycle Research Discussion Paper Series 26, Economics, The Univeristy of Manchester.
  7. Dick van Dijk 1 & Birgit Strikholm & Timo Ter�svirta, 2003. "The effects of institutional and technological change and business cycle fluctuations on seasonal patterns in quarterly industrial production series," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 79-98, 06.
  8. Antonio Matas-Mir & Denise R. Osborn & Marco Lombardi, 2005. "The Effect of Seasonal Adjustment on the Properties of Business Cycle Regimes," Econometrics Working Papers Archive, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti" wp2005_15, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
  9. Yoshito Funashima, 2012. "The effects of public investment smoothing as a stimulus measure on construction industry in Japan," Economics Bulletin, AccessEcon, vol. 32(3), pages 1992-2006.
  10. Irma Hindrayanto & Jan Jacobs & Denise Osborn, 2014. "On trend-cycle-seasonal interactions," DNB Working Papers, Netherlands Central Bank, Research Department 417, Netherlands Central Bank, Research Department.

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