Thursday, August 12, 2010

Summer: Is it Demand or Supply?

A few readers have wondered whether the summer employment surge, especially for teens, reflects demand or supply.

Of course, to some degree the demand for teenage workers shifts during the summer. But the demand shift is less than the supply shift. To see this, you could look at the seasonal for wages or, as I did in my paper, look at the seasonal for teenage unemployment.

If demand were shifting more than supply, then teen unemployment would be low in the summer -- summer would be the easiest time for an eager teenager to find a job. If supply shifted more than demand, then teen unemployment would be high in the summer, especially early in the summer before the market had much time to absorb all of those students storming out of school, because each teen job searcher has so many other teens with whom to compete.


TGGP said...

You might be interested in some of the posts at the Political Calculations blog. There was a series of "Economic Detective" posts on minimum wage increases and the reduction in teen employment.

marmico said...

There is something wrong with your chart. September and October are always below the zero deviation trend line (August is flat) for the 2003-2009 period.

Now the way I would frame the issue is that supply is the increase in the teen labor force and demand is the increase in the employment level from the September-April baseline. The storming teen surge commences in May and peaks in July. The average increase in surge supply is ~27% and the average increase in surge demand is approximately the same.

As Cowen would say both blades of the scissor are shifting and the shifts seems fairly equal to me.