Dynamic employment adjustments over business cycles

This paper uses U.S. monthly industrial production employment data between 1964 and 2000 to examine the dynamic labor adjustments of production workers and nonproduction workers in both the short and long-run. The results from the short-run analysis show that the dynamic adjustment of production workers is consistent with business cycles. However, the adjustment of nonproduction workers is relatively fixed, lags behind the shocks over business cycle changes, and exhibits the quasi-fixed factor property. In the long-run, we found that nonproduction workers and production workers are cointegrated indicating that the two series are in long-run equilibrium. Copyright Springer-Verlag 2005