Heterogeneity in Sectoral Employment and the Business Cycle

21 Pages Posted: 13 Dec 2012

Date Written: 2009


Using a factor analytic framework, we show that employment variations differ significantly across sectors. In some sectors, notably in goods production, employment movements are driven almost entirely by aggregate shocks. Because aggregate shocks drive business cycles (i.e., sector-specific shocks tend to average out), these sectors are then particularly sensitive to these cycles. In other sectors, mainly in service-providing activities, employment variations are virtually unrelated to aggregate shocks and instead result almost exclusively from sector-specific shocks. This heterogeneity in sectoral employment movements suggests that agents working in different sectors of the U.S. economy are affected in very different ways by changes in the economic environment.

Suggested Citation

Malysheva, Nadezhda and Sarte, Pierre-Daniel, Heterogeneity in Sectoral Employment and the Business Cycle (2009). FRB Richmond Economic Quarterly, vol. 95, no. 4, Fall 2009, pp. 335-355. Available at SSRN: https://ssrn.com/abstract=2188472

Nadezhda Malysheva


Pierre-Daniel Sarte (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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