The seasonal cycle and the business cycle.

• Author: Miron, Jeffrey C.

The Seasonal Cycle and the Business Cycle

Most recent research on macroeconomic fluctuations ignores the seasonal variation in the economy by working with seasonally adjusted or annual data. There are several reasons why this approach may be desirable. Seasonal fluctuations might be small enough relative to business cycle fluctuations that removing them has little effect on empirical results. Alternatively, seasonal fluctuations might be generated by fundamentally different mechanisms than the ones that produce cyclical fluctuations, in which case the two kinds of fluctuations can be addressed separately. Finally, seasonal fluctuations might be natural and desirable while business cycle fluctuations traditionally are thought to involve significant welfare losses.1 (1) Undoubtedly one further reason for the general preference for seasonally adjusted data is that seasonally unadjusted data often are difficult to obtain. In most cases, however, seasonally unadjusted data (or reasonable proxies for such data) can be constructed. See the appendixes to the papers cited below for sources of seasonally unadjusted data.

The research that I have carried out over the past five years challenges a number of the most frequently cited reasons for ignoring seasonality, and it suggests that a unified approach to studying seasonal and cyclical fluctuations may be warranted. This line of research resumes an older tradition of NBER analysis of fluctuations, exemplified by Simon Kuznets, in which both seasonal and business cycle fluctuations were regarded as important topics of investigation.2 Here I summarize the main findings of my research to date and discuss possible implications of the results for understanding economic fluctuations. (2) S. Kuznets, Seasonal Variations in Industry and Trade, New York: NBER, 1933; W.S. Woytinsky, Seasonal Variations in Employment in the United States, Washington, DC: Social Science Research Council, 1939; J.P. Bursk, Seasonal Variations in Employment in Manufacturing Industries, Philadelphia: University of Pennsylvania Press, 1931; E.W. Kemmerer, Seasonal Variations in the Relative Demand for Money and Capital in the United States, National Monetary Commission, 1910; and F.R. Macaulay, Some Theoretical Problems Suggested by Movements of Interest Rates, Bond Yields, and Stock Prices in the United States since 1856, New York: NBER, 1938.

The Patterns and Importance

of Seasonal Fluctuations

The first goal of my research has been to examine the seasonal patterns in standard macroeconomic variables and to document their quantitative importance.3 Seasonal fluctuations account for more than 85 percent of the fluctuations in the rate of growth of real GNP, and seasonal fluctuations are present in every major type of economic activity, including consumption, investment, government purchases, industrial production, retail sales, unemployment, and the money stock. Seasonal movements are not a quantitatively important feature of either prices...