Posted Tuesday, Feb. 28, 2012, at 1:42 PM
As it's February 29th coming up tomorrow, a few people have asked me whether I think the creation of an extra day provides any kind of boost to the economy. The short answer is "not really."
The longer answer starts with a bit of math. One extra day makes the year 0.27% longer theoretically allowing for 0.27% more economic activity to take place. So it's true that all things considered you might get a smallish boost to aggregate output and income totals. But in terms of things people care about like unemployment only increasing the density of economic activities provides a boost. Taking another full 24 hours to do another 24 hours worth of work doesn't change anything. That said, on shorter time frames it does make a difference. Anyone who's subjected to monthly performance metrics of any kind will do a bit better than he would in a normal February. This is mitigated by the fact that even with Leap Day added, February is still a freakishly short month, so it's not like anyone is going to use their extra day to break sales records.
Now if there were actual traditions based on Leap Day—as depicted last week on 30 Rock where in the fiction Leap Day is a major national holiday—then you would expect to see real impacts. Seasonality is a very real feature of the American economy, and that's only partly about the weather. Big holidays are associated with pricing anomalies of various kinds (turkey on Thanksgiving, for example) that reflect the real consequences. If you had a holiday that occurred just once every four years and that involved a lot of travel, or days off, or consumption of special food or beverages, something would probably happen especially because adjusting the structure of production to such a rare event would be difficult. But in the real world nothing happens on Leap Day except the addition of an extra day, so nothing really changes.