One of the oddities of the macroeconomy is the fact that GDP falls wildly every year in the beginning of winter. That means that there is a kind of recession every winter. It isn’t an official recession because everyone expects it and plans for it so there isn’t the same kind of economic pain that an official recession produces. Economists avoid calling every winter a recession in two ways. First, we have officially defined a recession as a downturn in GDP that lasts two or more quarters. The annual winter slump only lasts one quarter, so that simply defines the issue away. Secondly, statisticians “seasonally adjust” our GDP data to try to smooth out the seasons to pretend that they don’t exist! That makes the annual winter slump disappear from the official data that we ordinarily use, and the intent is to make the long-term trends more visible by smoothing out the short-term seasonal “noise”, but the seasonally-adjusted data is less realistic if you are concerned with the short-run state of the economy which is certainly important when studying short-run phenomena such as recessions.
For example, here is a comparison of the seasonally-adjusted data in blue versus the original data in red.
As you can see, the magnitude of the fall in the raw GDP data (red line) from the last quarter of each year (with the busy Christmas season) to the first quarter of each year (when there is little outdoor work in much of the country due to freezing temperatures) is about as big as the official seasonally-adjusted (blue line) recession of 2008–the biggest recession since the great depression.
Unemployment also fluctuates seasonally, and unemployment data shows more seasonal detail than with GDP data because unemployment data is collected monthly whereas GDP data is only collected quarterly. Here is the raw GDP data compared with the raw unemployment data (where I’m calling it “raw” data because it is the original, non-seasonally-adjusted data):
The unemployment graph (blue line) shows two spikes per year—one in January when retailers lay off workers and one in June when there is an influx of new graduates and students looking for work. The two spikes are probably caused by different factors. The January spike is probably caused by a drop in demand as employers need less help and the June spike is caused by an increase in supply when more people are looking for work.
The January unemployment spike has been getting smaller over the decades as the percent of the labor market that is engaged in seasonal work like agriculture has been gradually declining and more and more of the labor market has shifted into services like healthcare that have steadier demand.
Because both employers and workers expect this kind of fluctuation in the labor market however, you actually see more workers getting discouraged and dropping out of the labor market in January, so it probably isn’t the hardest time to get a job according to data on the number of unemployed people per job opening. This is probably the best measure of how hard it is to find a job at any given time:
By this measure, now could be the best time in recorded history to look for a job. (Note that our historical record only goes back to the year 2000 for this data, so ‘best in history’ isn’t as dramatic as it sounds, but given the overall state of the labor market, I’d guess that this is about the best time in at least a half century.)
We are in a remarkable time in history in which for the past year and a half there have been more job openings than people looking for work!
The data in this graph only goes up to last August, but every year the graph falls in October which is the second best month to look for a job after the month of April.
This graph shows the average number of workers who are looking for a job per the number of job opening for each month in the data series that we have from 2000 to the present. Given that October is one of the best months to look for a job, and the labor market is extremely tight, this could well be the best month in recorded history to look for a job.
As a result, real median wages have been rising:
Wages have only been keeping up with GDP growth for a couple years now, so it hasn’t been anything dramatic except by comparison with the stagnant wages we have had during the rest of the past half century.
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