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New Evidence on Cyclical Variation in Average Labor Costs in the United States

Author

Listed:
  • Grace Weishi Gu

    (University of California Santa Cruz)

  • Eswar Prasad

    (Cornell University, Brookings Institution, and NBER)

  • Thomas Moehrle

    (U.S. Bureau of Labor Statistics)

Abstract

We provide new evidence on the cyclicality of employers' real labor costs using BLS establishment job data for the 1982–2018 period. Average straight-time wages have become countercyclical since the financial crisis and the subsequent Great Recession. So have benefit expenditures and overall labor costs, as well as major benefit expenditures, including health insurance and Social Security. Consistent with prior literature, we find that total earnings—the sum of straight-time wages, bonuses, and overtime earnings—were procyclical before 2008; even earnings have become countercyclical since then. The increasing countercyclicality of labor costs is largely attributable to periods with below-trend GDP.

Suggested Citation

  • Grace Weishi Gu & Eswar Prasad & Thomas Moehrle, 2020. "New Evidence on Cyclical Variation in Average Labor Costs in the United States," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 966-979, December.
    • Handle: RePEc:tpr:restat:v:102:y:2020:i:5:p:966-979
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    2. Albagli, Elías & Contreras, Gabriela & Tapia, Matías & Wlasiuk, Juan M., 2022. "Earnings cyclicality of new and continuing jobs: The role of tenure and transition length," Labour Economics, Elsevier, vol. 78(C).

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