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Hours worked and unemployment: United States vs. Germany

Many economists argue that German labor market reforms implemented in the 2000s clearly paid off during the global recession, particularly the combination of less-generous unemployment benefits, wage moderation, and incentives to hoard labor. A long-established work program called Kurzarbeit (literally “short work”) is credited with helping to smooth Germany’s labor market adjustment much better than in previous recessions by allowing firms to reduce employee hours.

The graphs provide some evidence of the effect of this program at the aggregate level. Average annual hours per worker between 2008 and 2009 dropped by 1.87 percent in the United States, but fell more markedly—by 2.74 percent—in Germany. Massive layoffs occurred in the United States, but employment losses were barely noticeable in Germany. In addition, between the recession’s peak and trough, the U.S. employment-to-population ratio decreased by 2.6 percentage points (from 48.4 to 45.8 percent) while it increased by 0.6 percentage points in Germany (from 48.7 to 49.3 percent).

If this labor market feature works well in Germany, could it be adopted in other countries as well? One version of a short-time work program—called work sharing—already exists in the United States, with the goal of limiting job losses during difficult economic times. At the start of this year, twenty-six states and the District of Columbia were able to offer the program (now under the umbrella of the Layoff Prevention Act of 2011), though the levels of implementation vary.

How this graph was created: The graph of unemployment rates is a simple plot of the unemployment rates for the two countries since 2008. The graph of hours worked is plotted using the option “Index (scale value to 100 for the chosen period).” The data samples were shortened to highlight the previous recession cycle.

Suggested by Silvio Contessi and Li Li.

View on FRED, series used in this post: DEUAHWEP, LRHUTTTTDEM156S, UNRATE, USAAHWEP

Debt- and deficit-to-GDP dynamics

Several historical examples show that financial crises generate large increases in private and public debt that take many years and sometimes drastic measures to resolve. The recent global financial crisis, which began in 2007, was no exception: The public debt of the affected countries increased to levels not seen for decades.

During a recession, tax revenue falls because of the contraction of GDP and governments also increase spending. The combination of these two forces increases deficits, and debt-to-GDP ratios can rise quickly as a result.

This mechanism can be seen very clearly in these scatter diagrams: Debt-to-GDP ratios (vertical axis) and deficit-to-GDP ratios (horizontal axis) are shown for the United States (red dots), Japan (blue dots), and the euro area (green dots) for several years after 2001. The changes in the two ratios are more marked for the recent financial crisis than what would be seen for plain vanilla recessions (such as the U.S. recession in 2001) that are not associated with such crises. As the recession ended, the deficit ratios started to decline because tax revenue grew and primary deficits (excluding interest) contracted. But the debt ratios kept rising, in part because primary balances are still negative and in part because the burden of interest is now larger.

How this graph was created: Search for and select the appropriate series for central government debt for each country and then add the appropriate series for the deficit-to-GDP ratio. Select “scatter” for the graph type in “settings.” The width of the lines connecting the dots can be adjusted in the settings of the first series.

Suggested by Silvio Contessi

View on FRED, series used in this post: FYFSGDA188S, GFDEGDQ188S, GGGDTAEZA188N, GGGDTAJPA188N, GGNLBAEZA188N, GGNLBAJPA188N

Quitters, public and private

St. Louis Fed economist David Wiczer recently assessed the labor landscape by comparing rates of workers quitting their jobs with rates of workers being let go. This graph takes a simpler view and shows the rates of workers quitting in the public and private sectors. The private-sector rate is obviously higher; in July 2005, for example, the private-sector rate was 460 percent of the public-sector rate.

Not surprisingly, though, the rates track each other pretty closely: Any worker would be more inclined to quit a job when economic prospects are good and less inclined when they’re not so good. But the data behind this graph show that the gap between the rates has narrowed a bit since the recent recession. From December 2000 to June 2009, the private-sector rate was on average about 350 percent of the public-sector rate; since then, the gap has fallen to about 320 percent. The graph does show a recent rise in the private-sector quit rate, however, so the gap may be increasing.

How this graph was created: Select the first series, “Quits: Total Private,” and then add the second series, “Quits: Government.” Both series shown here are seasonally adjusted monthly rates. You can also search for specific industries (e.g., construction or manufacturing) and other measures (e.g., layoffs and discharges).

Suggested by George Fortier.

View on FRED, series used in this post: JTS1000QUR, JTS9000QUR

Mapping international data


GeoFRED, part of the FRED family, allows you to map many data series that exist in FRED. GeoFRED just underwent a major overhaul and now features a modern layout and plenty of new functionality. It also includes plenty of data series that cover a wide range of geographical territory. It used to cover only regional U.S. data, such as states, counties, and MSAs; but now it also encompasses international data, such as the per capita GDP data shown above. Enjoy exploring this renewed site!

How this graph was created: No need to search for the series, as this is the default graph on GeoFRED. But you can also find it by selecting this series in the tool bar. Country labels were removed by unchecking “display labels.” Finally, the graph was saved using the “download & print” tab of the tool bar.

Suggested by Christian Zimmermann

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