Asymmetry in the cyclical behaviour of the South African labour market

Abstract

Economists have long been hypothesising that business cycles are asymmetric. Keynes (1936) argued that recessions are usually short but severe, while expansions are usually longer but milder and characterised by more gradual changes in economic indicators. Recently, several authors have argued that various economic indicators behave asymmetrically over the course of the business cycle (see for example Stern 2001, Acemoglu and Scott 1994, Rothman 1991, and Andolfatto 1997). This article examines the extent to which total and sectoral employment in the South African economy is related to the state of the business cycle. A Markov switching regime model is used to model the state of the business cycle, and this model is included in models of employment in the various economic sectors to capture cyclical asymmetry.