The FRED® Blog

Bank failures

The previous recession was clearly associated with substantial problems in the financial sectors. As the graph shows, there has been a significant number of bank failures, as recorded by the Federal Deposit Insurance Corporation (FDIC), which is responsible for managing the closure process and insuring depositors. The number of failures, however, is nowhere near the peak around 1989, the time of the savings and loan crisis. The recession around that time involved different financial problems and thankfully was much less deep than the previous recession.

How this graph was created: Search for “bank failures” and then change the graph type to “Area” under graph settings in the graph tab.

Suggested by Christian Zimmermann

What’s the “normal” unemployment rate?

As the U.S. unemployment rate inches down, it seems reasonable to ask when it will be back to normal. One measure of “normal” is the natural rate of unemployment, sometimes referred to as NAIRU, published by the Congressional Budget Office. This measure is meant to contain all relevant information except for cyclical factors in the unemployment rate. Thus, when there is no difference between the NAIRU and the standard unemployment rate, the standard unemployment rate should be back to normal. Note that the natural rate is calculated, not measured, and thus is subject to the assumptions made. Some of those assumptions relate to whether structural factors should be taken into account. This question led (temporarily) to two different natural rates during the previous recession.

How this graph was created: Search for NAIRU, select both series, and add them to a graph. Then add the civilian unemployment rate. Finally, change the end date to the current date.

Suggested by Christian Zimmermann

International residential prices

FRED recently added a long list of international residential prices from the Bank for International Settlements. The graph above, which offers only a small glimpse of what FRED has to offer, compares the evolution of residential prices for a few countries. Note that the indices are all normalized in 2010, which highlights the large run-up and drop prior to that year in the United States. Similar events also occurred in the other countries, though the effects were much more muted. Surprisingly, Canada seems particularly immune from developments in the United States, except for a temporary drop in 2008.

How this graph was created: Go to the BIS release and select the relevant series. Click on “Add to graph.”

Suggested by Christian Zimmermann

More prices that deviate from the CPI

We recently discussed some CPI categories that do not tend to have rising prices. Those examples were all linked to information technology. Here’s a wide variety of categories where prices can decrease or remain stable for long periods. For example, coffee is subject to wide fluctuations, including steep price drops. Apparel became disconnected from the CPI sometime in the early 1990s and remains largely constant. It is more surprising that cosmetics and musical instruments are also consistently below general inflation or even flat. In the motor vehicles category, some quality improvements only partially affect the overall price of motor vehicles; this is another example, much like computers, of a category that does not closely follow the overall path of the CPI.

How this graph was created: Start with the graph for the CPI, then add the other series. Change the color of the CPI line to black and thicken it to distinguish it from the many other series.

Suggested by Christian Zimmermann

Not all prices increase

It is natural to complain that some prices increase. But don’t forget that prices can also decrease. While there are obvious seasonal fluctuations for some goods (say, agricultural products), other goods have been declining year over year, contributing to a general price inflation that is lower than one may think. The prime example shown here is anything related to information technology. It is no secret that IT devices with a given set of characteristics have continuously fallen in price. Or, to put it differently, a device of the same price year after year will provide much better performance; its price by “unit of performance” must therefore be declining. This graph shows some CPI categories where advances in IT have lead to price decreases. Or at least no price increases. This is not restricted to the IT category, of course. A future blog post will explore more examples on this topic.

How this graph was created: Search for CPI, then add the other series. Because their base years are different, the axis labels get crowded. So, these were removed by unchecking “Axis titles” in the graph settings.

Suggested by Christian Zimmermann.

A clearer picture of housing equity before the crisis

This graph shows housing equity in the United States. The way it’s shown here, housing equity appears to have undergone an extremely unhealthy evolution: rapidly accelerating run-up, sudden and brutal crash, and another rapid run-up. There’s no doubt the housing crash has been significant; after all, housing equity was cut by half. But the alarming run-up shown in this graph is to some degree an optical illusion. Indeed, an increase in the 1950s isn’t equivalent to a same-sized increase in the 2000s because the level of the series was dramatically different. For a clearer picture, we’ll use the natural logarithm of the series.

Now, the run-up around 2000 looks like a normal part of a trend that’s continued for more than half a century. The illusion shown in the top graph can occur whenever a series grows over time. Think of the principal on a savings account that accumulates interest. Soon enough, the effect of compounding interest kicks in and the principal appears to explode, even though it’s still growing at the same interest rate.

How this graph was created: For the first graph, search for the series name. For the second, expand the “Create your own data transformation” option in the graph tab and choose the “Natural Log” transformation.

Suggested by Christian Zimmermann

This recession was different

Most recessions share common characteristics, but not the most recent one. To illustrate this, we use a little known and used feature of FRED: setting a common index value and examining a period before and after that point. In the graph, you see four versions of the same series, civilian unemployment. Each series is centered on a different recession peak date, with a value of 100 for these start dates. The graph also shows data for 60 months before and 80 months after those dates.

The period before the start dates reveals nothing remarkable, but the most recent recession deviates from the other recessions after the start date: The unemployment rate shoots up much higher, and despite a steeper downslope the unemployment rate has yet to reach a value that would be expected from a normal recovery. (By the time 80 months had elapsed from the other recessions’ start dates, the unemployment rates had essentially returned to where they started.)

How this graph was created: Find the “Civilian Unemployment Rate” and modify the units to “Index (Scale value to 100 for chosen period).” For this graph, we use “U.S. Recession Peak” (vs. the “Trough” or another “Observation Date”). The default will be the peak of the most recent recession. Then choose the “Display integer periods instead of dates” option. Choose an interior period range of -60 to 80. Add this unemployment rate series three more times, performing the same manipulations but selecting different recession peaks.

Suggested by Christian Zimmermann

The seasonality of e-commerce

We know that retail sales move with the seasons, but what about e-commerce retail sales? FRED has the data, so we can take a look. The graph shows this series is also very predictable. The general trend is a straight line, with a pattern of increasingly large spikes in the fourth quarter. But e-commerce seasonal patterns are particularly striking: Retail sales in general always rise in the fourth quarter, but e-commerce sales do so even more intensely.

How this graph was created: Search for “E-Commerce” and select the “Sales Share” series without seasonal adjustment.

Suggested by Christian Zimmermann

The demographics of the activity rate decline

Many are lamenting the record lows in the labor force participation rate (or activity rate). The debate is whether this decline is cyclical or structural. The structural view has much to do with demographic shifts as the population gets older on average, so let’s look at the rates for different age groups.

We see a strong drop in participation by young men, likely reflecting a larger share who are staying in school longer. Older men’s participation hasn’t changed much. The bulk of the overall decline comes from middle-aged men. They are the largest group and have the largest impact. But their participation has been declining throughout the sample period, so it is not a new phenomenon for them.

For women, the story is very different because of their large increase in labor force participation up until the end of the past century. Older women are still increasing their participation, but recent declines for younger women seem to mirror the declines for men. So, the recently accelerating decline in the overall participation rate may have to do with women’s participation just not increasing like it used to.

How the graphs were created: Search for “Activity Rate,” then use the tags to limit the series to “Nation,” “USA,” and then “Males” or “Females.” Select the series and then add them to the graphs. Depending on the order of the series in the search results, you may have to adjust line colors to make them consistent in the two graphs.

Suggested by Christian Zimmermann

Inflation in the dollar zone

In a recent FRED Blog post, we showed how the exchange rate regime has had an impact on inflation rates in Europe. This time, we look at the dollar zone. Indeed, several countries have adopted the U.S. dollar as legal tender, and it is startling how their inflation rates have rapidly converged toward the U.S. rate. Just look at the graph. This convergence was likely the intention of those countries: Ecuador in 2000 and El Salvador in 2001 switched to the U.S. dollar to fight against very high inflation rates. Panama had already adopted the U.S. dollar in 1904 and has had no such problems with inflation.

How this graph was created: Search for “Inflation” and the respective countries. In the case of the U.S., change the units to “Percent Change from Year Ago” to match the units of the other series. The line width for the U.S. was increased and the color changed to black.

Suggested by Christian Zimmermann

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