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Gender labor force participation gaps

In a recent article in the Regional Economist, Li Li and I plotted gender gaps in labor markets of G7 countries in 1991, 2001, and 2011. We focused in particular on two gender gaps: labor force participation (the difference in labor force participation rates for men and women) and unemployment (the difference between the unemployment rate for men and women).

While we used data from the World Bank and OECD, we could have just as easily transformed FRED data series to obtain these gaps. In the graph, we show the gender labor force participation rate gap in the United States and the G7 country with the largest gender labor force participation gap in the most recent data: Italy.

In the United States, the labor force participation rate for men has been trending down since World War II, while the labor force participation rate for women has been trending up—that is, until the Great Recession, when it began trending down in parallel with the rate for men. The gap has shrunk to about 10 to 12 percent. In Italy, the trend of the gap is very similar, but it’s shifted to the right and to date the gap is still almost twice as large as that in the United States.

How this graph was created: After finding the first series (men, United States) and the second series (women, United States), create your own data transformation using the formula a-b. After finding the same two series for Italy, apply the same transformation.

Suggested by Silvio Contessi

View on FRED, series used in this post: ITALFPMNA, ITALFPWNA, LNS11300001, LNS11300002

The Taylor Rule

This graph shows in blue the Taylor Rule, which is a simple formula that John Taylor devised to guide policymakers. It calculates what the federal funds rate should be, as a function of the output gap and current inflation. Here, we measure the output gap as the difference between potential output (published by the Congressional Budget Office) and real GDP. Inflation is measured by changes in the CPI, and we use a target inflation rate of 2%. We also assume a steady-state real interest rate of 2%. These are a lot of assumptions, and you are welcome to change them on the graph by playing around with the formula to see how the Taylor Rule matches up with the effective federal funds rate. To read up on the Taylor Rule, see the original article or an article by former St. Louis Fed president William Poole.

How this graph was created: To create a new series from several series, first add the series by modifying the existing series in the “Graph” tab. Once you have assembled them all, expand the series section in the same tab and “create your own transformation.” Finally, as the axis legend has become unwieldy, remove it by checking off the mark in the graph tab.

Suggested by: Christian Zimmermann

Update: A previous version did not multiply the output gap by 100.

View on FRED, series used in this post: FEDFUNDS, GDPC1, GDPDEF, GDPPOT

The decline of manufacturing

Many have complained about the decline of the manufacturing sector in the United States. As this graph shows, how recently this decline started depends on what you look at. If you look at the number of people employed in that sector, the decline started only a decade ago. If you look at the share of manufacturing in total employment, the steady decline has been ongoing for decades. For a nice overview of the evolution of employment in the manufacturing sector, see this article in the Journal of Economic Perspectives.

How this graph was created: Choose the MANEMP series to graph the line and add the MANEMP series again to create a ratio with the PAYEMS series. (Use the “create your own data transformation” feature to enter the formula.) The units for both series are very different, so be sure to use the left y axis for one set of units and the right axis for the other.

Suggested by Christian Zimmermann

View on FRED, series used in this post: MANEMP, PAYEMS

Long-run inflation expectations

The Federal Reserve Bank of St. Louis recently held its 25th annual Homer Jones Memorial Lecture. This year’s Lecture was given by University of Chicago Professor Robert E. Lucas, recipient of the 1995 Nobel Prize in Economics. Professor Lucas emphasized that, over long periods of time, inflation depends importantly on money growth. Countries with high inflation have invariably experienced rapid rates of money growth. So, some economic analysts, financial market participants, and ordinary citizens are worried that the more than fourfold increase in the monetary base since October 2008 (from $895 billion to $3,885 billion) will lead to much higher rates of inflation. At this point, though, key measures of inflation—as measured by the year-to-year percent change in the CPI and PCE price indexes—continue to track below the Fed’s 2 percent inflation target. However, since the Fed’s actions tend to affect the economy with a lag, expectations about future inflation are important in setting prices today: If the public expects higher inflation in the future, then it’s more likely inflation will begin to rise in the present. There are many ways to measure inflation expectations, including forecasts from economic models and surveys of consumers and businesses. One well-known measure of inflation expectations is the simple difference between yields on nominal Treasury securities and yields on inflation-adjusted Treasury securities. These series are available in FRED. This chart plots the difference between yields on 10-year Treasury securities and 10-year inflation-protected securities (TIPS); this difference provides a measure of the financial market’s expected average inflation rate over the next 10 years. A few observations from the chart are worth noting. First, relative to the period from 2004 to mid-2008, long-run inflation expectations have been more volatile since the onset of the financial crisis in August 2008. Second, inflation expectations fell sharply during the financial crisis and shortly thereafter but quickly rebounded. Finally, while more volatile, long-run inflation expectations, on average, have been slightly lower after the financial crisis than before the crisis. Bottom line: Financial markets believe that the Federal Reserve will not allow inflation to accelerate, despite the huge increase in the monetary base.

How this graph was created: First, plot the 10-Year Treasury Constant Maturity Index, daily. Second, adjust the sample to 2004-01-02. Third, click the “Add Data Series” arrow. In the search box, search for “10-Year Treasury Inflation Indexed Security.” Choose the daily series. Next, click the “Modify existing series” button and then click on “Add Series.” Finally, to plot the difference between the two series, click on the “Edit Data Series” button. Next click on “Create your own data transformation.” In the formula box, type “a-b” and then click “Apply.”

Suggested by Kevin Kliesen

View on FRED, series used in this post: DFII10, DGS10

Loan delinquency

It should surprise no one that delinquency rates on credit cards and home mortgages rose during the past recession. The delinquency rate for credit cards has always been higher than the rate for mortgages…until now. In fact, the credit card delinquency rate is at its lowest recorded point since it has been tracked. Why is this special? Credit card debt isn’t backed by any asset, as mortgage debt is. So, credit card delinquency is expected to be higher, which is why interest rates for credit card debt are higher than rates for mortgage debt.

How this graph was created: After finding the first series, add the second series, then choose “Bar” in the graph settings.

Suggested by Christian Zimmermann

View on FRED, series used in this post: DRCCLACBS, DRSFRMACBS

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