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The Beveridge curve

What’s new in FRED? Beyond the pie charts we saw on the blog a week ago, FRED also features scatter plots, like the one shown here. The classic scatter plot used in economic analysis is the Beveridge curve, which describes the dynamics of the labor market through the business cycles, with the unemployment rate on the horizontal axis and the job openings rate on the vertical axis. Thus, every point corresponds to the values of those two rates on a particular date, with the dates connected by a line.

As one would expect, when the unemployment rate is high, the job openings rate is low (and vice versa). If markets were perfectly fluid with perfectly adjustable wages, both rates would be zero. But there are all sorts of frictions, from rigidities in wages to spatial, sectoral, and competency mismatches between demand and supply of labor. These frictions typically generate a scatter plot that looks like a banana, as the markets react sluggishly to changing conditions. Because the current business cycle has been so long and continues even now, the line around the banana is not yet complete.

How this graph was created: Select the two series, the maximum time range, then choose “scatter” for the graph type. To connect the dots, choose a non-zero line width in the settings of the first series. That’s where you can also adjust the size of the dots.

Suggested by Christian Zimmermann

View on FRED, series used in this post: JTSJOR, UNRATE

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