Is labour becoming more or less flexible? Changing dynamic behaviour and asymmetries of labour input in US manufacturing

Have employment and hours become more flexible over time? Vector auto-regressions are estimated using monthly time-series data to generate impulse responses, which reflect the dynamic response of employment and average hours of labour input following a given shock in output demand. A marked change in the US manufacturing sector occurred after 1979. Although there is heterogeneity by industry and asymmetry over the business cycle, hours have become somewhat more and employment considerably less flexible, particularly during expansion phases. Employers are apparently delaying hiring and relying more on using hours as a buffer to absorb fluctuations in output demand. Copyright 2005, Oxford University Press.