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Confusion about the economic value of an extra day

Leap Day Williams featured from the NBC television show 30 Rock
Souce: NBC
Leap Day Williams featured from the NBC television show 30 Rock

Having an extra day in the year means people will spend more money, but that doesn't mean everybody will earn more.

That's why there's no easy answers when determining the economic impact of Leap Day, which was making its quadrennial appearance Monday.

If every day were indeed equal, then the simplest way to look at it would be to see how it affects total output. The extra day is worth an additional 1/365th of U.S. GDP, or about $50 billion. That's more than the annual GDPs of four states: Montana, South Dakota, Wyoming and Vermont.

But, and this is a big but: Not everything costs more on Leap Day. If you're a salaried worker, then you don't cost more to your employer. Your work is free that day. They pay you the same amount for the year, and you get the privilege of working an extra day. Gee thanks, physics.

The opposite is true for variable and usage-based prices. If you're paid on an hourly or daily basis, then an extra day of work is truly an extra day of pay. (One super small detail for those who care. This year's Feb. 29 pushes Dec. 31 to Saturday, so for the case of 2016, we didn't gain an extra work day).

Now let's look at costs to the consumer: Your cable bill, mortgage, Netflix bill, insurance and any other fixed monthly bill all stay the same, because those are fixed each month. You pay $10 to binge-watch "30 Rock" no matter if there's 31 or 28 days in the month.

But variable costs like gas, food, electricity usage all go up. If you're a salaried employee who has to pay extra for a tank of gas to drive to work and buy another lunch, then the day costs you more than it benefits you. If you're an hourly employee who can walk to work, then perhaps you profited overall. All that extra income, without much spent to earn it. About half of Americans are paid hourly, not salaried.

Yes, as far as official GDP rates go, the U.S. government does "adjust" away the effects of the extra day, but that's just math. In reality, there's true growth that happens on Leap Day, which is why there had to be an adjustment in the first place. What we don't know is if the adjustment is actually the correct one. Did they adjust enough, or too much? Some people get paid more, but not everybody. We all pay more for expenses, but not for every expense.

Note that not every government agency makes an adjustment. A spokesman for the Bureau of Labor Statistics said it makes no Leap Day adjustment to the monthly jobs report. The bureau doesn't adjust for the extra day because the experts don't know the extent of the shift. They know it moves the needle, just not how much.

Many emerging markets, such as China, don't make any adjustment at all to their GDP numbers. That's one reason why China's 2013 growth number fell short of estimates, having a day fewer than it did in 2012.

The U.K. Office for National Statistics — Britain's version of the BLS — adjusts GDP to make all Februaries comparable, according to the Telegraph. February is counted as 28 and a quarter days long every year, regardless of leap years

For trading markets or unadjusted economic data, the extra day is about 1 percent more days in the quarter. Annualizing that quarterly data means multiplying it by four, which translates to a 4 percent annualized jump. That's big if not properly dealt with.

But the actual day isn't notable in the markets. Of the past 10 Feb. 29ths, the S&P 500 was up on five, down on five.

There have been several proposals and petitions to make Feb. 29 a national holiday. Part of the reasoning is because some people feel they are unfairly working for that day. Others suggest that a national holiday would be a bigger benefit to the economy. Business and total spending could benefit if people went out and did new and interesting things. Think of Memorial Day or July 4. Consumers might spend more than if it were a normal workday.