Beyond the Annual Averages: Impact of Seasonal Temperature on Employment Growth in US Counties

BeyondtheAnnualAverages: ImpactofSeasonalTemperatureonEmploymentGrowthinUSCounties HaNguyenWP/23/142 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate. TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. 2023 JUN ©2023InternationalMonetaryFundWP/23/142 IMFWorkingPaper InstituteofCapacityDevelopment BeyondtheAnnualAverages: ImpactofSeasonalTemperatureonEmploymentGrowthinUSCounties PreparedbyHaNguyen* AuthorizedfordistributionbyMercedesGarcia-Escribano June2023 IMFWorkingPapersdescriberesearchinprogressbytheauthor(s)andarepublishedtoelicitcommentsandtoencouragedebate.TheviewsexpressedinIMFWorkingPapersarethoseoftheauthor(s)anddonotnecessarilyrepresenttheviewsoftheIMF,itsExecutiveBoard,orIMFmanagement. ABSTRACT:Usingquarterlytemperatureandemploymentdatabetween1990and2021,thispaperuncoversnuancedevidenceontheimpactofseasonaltemperaturewithinUScounties:higherwintertemperatureincreasesprivatesectoremploymentgrowthwhilehighersummertemperaturedecreasesit.Theimpactsofhighertemperatureinmildseasons,fallandspring,arestatisticallyinsignificant.Moreover,thenegativeimpactofhighersummertemperaturepersistswhilethepositiveimpactofhighertemperatureinthewinterismoreshort-lived.Thenegativeeffectsofahottersummerarepervasiveandpersistentinmanysectors:mostsignificantlyin“Construction”and“LeisureandHospitality”butalsoin“Trade,Transport,andUtilities”and“FinancialActivities.”Incontrast,thepositiveeffectsofawarmerwinterarelesspervasive.Theemploymenteffectofahottersummerhasbeenmoresevereinrecentdecades. RECOMMENDEDCITATION:Nguyen,H.(2023).BeyondtheAnnualAverages:ImpactofSeasonalTemperatureonEmploymentGrowthinUSCounties.IMFWorkingPapers,2023/142 JELClassificationNumbers: C33,C55,E24,O44,Q54 Keywords: Climatechange;temperature;employment;UScounties Author’sE-MailAddress: Hnguyen7@imf.org IthankRabahArezki,BasBakker,AdolfoBarajas,RudolfsBems,AndrewBerg,MaiDao,MercedesGarcia-Escribano,HuiHe,ToanPhan,KoralaiKirabaeva,VladimirKlyuev,AntonKorinek,RuyLama,EmanueleMassetti,RodolfoMaino,JoeProcopio,NoomanRebei,NikolaSpataforaandMaryamVaziriforveryhelpfulcommentsandfeedback,andRuchunLiforeditorialhelp.IamgratefultoBerkayAkyapiandEmanueleMassettiforintroducingtomeclimatedataviaGoogleEarthEngine. WORKINGPAPERS BeyondtheAnnualAverages: ImpactofSeasonalTemperatureonEmploymentGrowthinUSCounties PreparedbyHaNguyen1 1IthankRabahArezki,BasBakker,AdolfoBarajas,RudolfsBems,AndrewBerg,MaiDao,MercedesGarcia-Escribano,HuiHe,ToanPhan,KoralaiKirabaeva,VladimirKlyuev,AntonKorinek,RuyLama,EmanueleMassetti,RodolfoMaino,JoeProcopio,NoomanRebei,NikolaSpataforaandMaryamVaziriforveryhelpfulcommentsandfeedback,andRuchunLiforeditorialhelp.IamgratefultoBerkayAkyapiandEmanueleMassettiforintroducingtomeclimatedataviaGoogleEarthEngine. Contents I.Introduction4 II.ATheoreticalFramework6 III.DataandEmpiricalSpecification9 Data9 EmpiricalSpecifications10 IV.MainFindings11 AnnualRegressions11 MainFindings12 V.SummerandWinterImpactsAcrossState’sClimate15 VI.OntheMechanismsoftheSummerTemperatureEffects18 VII.OntheMechanismsoftheWinterTemperatureEffects21 VIII.EffectsofTemperaturebyDecade23 IX.RobustnessChecks26 NotUsingCountyEmploymentWeights26 DroppingExtremeEmploymentGrowth27 DroppingRecessionQuarters27 ControllingforNaturalDisasters28 ControllingforPrecipitation29 X.Conclusions30 References30 Figures Figure1:DynamicImpactonYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature14 Figure2:AverageSummerImpactbyState16 Figure3:AverageWinterImpactbyState17 Figure4:TheEffectonEmploymentGrowthofHigherSummerTemperaturebySector19 Figure5:TheEffectofHigherWinterTemperaturebySector21 Figure6:AverageEmploymentSharesintheSummerandWinterinaCounty23 Figure7:AverageAnnualIncreaseinSummerTemperaturebyStateover1990and202124 Figure8:DynamicImpactofYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature(RegressionsareUnweighted)26 2 Figure9:DynamicImpactonYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature(TopandBottom1percentileofEmploymentGrowthDataareDropped)27 Figure10:DynamicImpactonYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature(EmploymentGrowthDataforRecessionaryQuartersareDropped)28 Figure11:DynamicImpactonYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature(ControllingforNaturalDisasters)29 Figure12:DynamicImpactonYoYEmploymentGrowthtoaOneDegreeFahrenheitHigherTemperature(ControllingforPrecipitation)29 Tables Table1:SummaryStatistics10 Table2:ImpactofAnnualAverageTemperatureonYoYGrowthofAnnualAverageEmployment11 Table3:ImpactofTemperatureonYoYPrivateEmploymentGrowth12 Table4:RelationshipbetweenEmploymentEffectandaState’sClimate18 Table5:ImpactofTemperaturebyDecade25 3 I.Introduction Climatechangeisthebiggestchallengeforhumankind.Temperatureisrising.Theglobalaveragetemperatureisalreadyabout1.2degreeCelsiushigherthanthepre-industriallevel.Droughts,wildfires,andmassivestormsarestartingtooccurmorefrequentlywi