The Comovement of Output and Labor Productivity in Aggregate Data for Auto Assembly Plants

This paper documents the importance of high-frequency plant shutdowns in auto assembly plants in generating the observed procyclicality of an aggregate labor productivity series for that industry. An important fact about plant shutdowns in this industry is that some workers typically remain at the plant when the assembly line is idle. Using a high-frequency panel of 22 auto assembly plants over an eight-year period, we find that the number of production worker hours reported from shutdown establishments is non trivial and highly cyclical. Using time-series analysis, we find that virtually all of the comovement between output and labor productivity for aggregate measures constructed from the panel is associated with labor hours reported at shutdown plants. This result is robust to the treatment of other measurement issues discussed in the literature, and to the choice of time-series technique