A Note on the Cyclical Behavior of Sectoral Employment in the U.S

Using data for 14 major sectors of the U.S. private economy and the government from 1958 to 2014, this note examines the cyclical behavior of sectoral employment. In particular, it investigates if relative volatility and comovement of the cyclical component of sectoral employment with real GDP have changed over time. The cyclical components are extracted using the Hodrick-Prescott (H-P) filter and changes in cyclical properties are detected using rolling standard deviations and rolling correlations. The analysis suggests that these properties have changed substantially for a number of service sectors since the early 1980s. In particular, wholesale and retail trade, transportation and utility, information, financial activities, and professional and business services have experienced significant increases in relative volatility. Furthermore, while the positive correlation between the cyclical components of employment and real GDP has become stronger for wholesale trade, transportation and utility, financial activities, and professional and business services, it has become weaker for information services, leisure and hospitality, and other services. Finally, education and health sector employment has switched from being procyclical to countercyclical. Recognizing these changes is important and useful for future research on business cycle behavior of the labor market in the U.S. and for policy formulation.