Wednesday, August 19, 2009

More on the Summer Jobs Surge

Copyright, The New York Times Company

Last week, I wrote about the seasonal employment surge: Almost 700,000 more Americans reported in July that they were employed than did in May. Since then, data releases, reader comments and additional space permit further interpretation of this fact.

The Census Bureau’s household survey found that, without seasonal adjustments, 141,055,000 Americans were working in July 2009, as compared to 140,363,000 who were working in May 2009. The two-month increase of 692,000 is significant, even when compared with some of the heaviest monthly job losses experienced during this recession.

Most of the media attention during this recession has been rightly focused on the seasonally adjusted employment series, because those remove the annual seasonal cycle and are therefore the best series for understanding whether the recession might be over. However, the seasonal employment and spending patterns themselves are normally the outcome of supply and demand, so they are a good laboratory for detecting a sudden change in the role of supply in determining employment outcomes.

Last week I explained how the supply of labor is an important factor every summer, and the summer of 2009 has been no exception: The end of the academic year makes more students willing and available to work, and the market finds work for them to do.

A lot of commentary has been quick to link employment to spending in the economy, and has given little attention to the supply of labor. However, late last week we learned that the volume of retail sales (not adjusted for seasonality) was actually lower in July than in May, and that the dollar amount of retail sales was essentially constant.

One reader inquired whether labor supply, while still relevant even in the depths of this recession, might be less important than in the past. I expect that there is something to this reader’s idea, because the minimum wage has increased three years in a row and is expected to create an excess supply of workers (especially among teenagers, and especially this year when the real minimum wage had already gotten pretty high even before July’s increase went into effect).

The chart below investigates this idea by comparing the seasonal employment cycle across years. Each series is the ratio of teenage employment to the employment of those 20 to 24. The teenage group is the most affected by the academic year because they have so many more members in school. The 20-to-24 age group is used as a benchmark to reflect the general decline in employment, and its possibly specific effects on the types of jobs that would disproportionately employ young people.


The summer of 2009 is the depth of this recession, whereas the recession was still pretty mild in the summer of 2008. The years 2006 and 2007 are before the recession, and the year 2006 before any minimum wage increase.

All four of the years – including 2009 – show a teenage employment spike in July. In fact, the July 2009 spike is about the same size – 15 percent (relative to the previous May) – as the 18 percent average of the prior three years.

It is true that a spike of 15 is less than a spike of 18, and this is consistent with the claim that the role of supply is slightly less important than it was before the recession. But the seasonal cycle clearly shows that labor supply remains important, and cannot be written off when looking at today’s job market fluctuations.

Unfortunately, demand-oriented public policy has done much during this recession to discourage the supply of labor, and little to encourage it.

3 comments:

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