We investigate the influence of periodically time-modulated cavity frequency on the generation of atomic squeezed states for a collection of N two-level atoms confined in a non-stationary cavity with a moving mirror. We show that the two-photon character of the field generated from the vacuum state of field plays a significant role in producing the atomic or spin squeezed states. We further show that the maximum amount of persistent atomic squeezing is obtained for the initial cavity field prepared in the vacuum state.