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Tracking the duration of unemployment

The latest recession was different from other postwar recessions. One striking feature is how the various durations of unemployment have changed. The fraction of long-term unemployed (>26 weeks) had never been the largest. But now it is the largest by far! Until now, the fraction of short-term unemployed (<5 weeks) has always been the largest. Now it’s second or even third. What’s so peculiar about this recession? Is this a new regime? To truly answer these questions, we most likely have to wait for new data to come in. FRED offers various tools to stay connected. 1. You can create a dashboard that allows you to track statistics. 2. You can place a widget on your web page that reveals the latest data for up to six series. 3. You can subscribe to email alerts for the latest updates of you favorite series. 4. You can put the relevant series in an Excel spreadsheet and refresh the data with a single click (thanks to our Excel add-in). 5. You can come back to this blog post from time to time, and its graph will automatically update with the latest data.

How this graph was created: Find the release table for unemployed persons by duration of unemployment, select the four relevant series at the bottom, and add them to the graph.

Suggested by George Essig

View on FRED, series used in this post: LNS13008397, LNS13025701, LNS13025702, LNS13025703

Parallel prices for oil-based fuels

The recent wild fluctuations in oil prices have been reflected in the end-user prices for various forms of fuel. This graph shows average prices at the pump for regular gas, diesel, and heating oil. What is remarkable is that they run nearly parallel to each other, except for a slow drift upward for diesel. These fuels have different patterns of seasonal demand (e.g., high demand for heating oil in winter and gas in summer), so their prices might reflect these variations. Yet, any seasonal price variations appear to be dwarfed by the price variations of the raw material in all three of these fuels: oil. Seasonal changes in demand are smoothed through storage of inventories and through price adjustments. Apparently, though, seasonal adjustments do not affect the prices of these fuels nearly as much as the price of oil does.

How this graph was created: Simply search for “Heating oil price,” then add the two other series. (Btw, the frequency of the series in this graph is monthly.)

Suggested by Christian Zimmermann

View on FRED, series used in this post: GASDESM, GASREGM, MHOILNYH

How did the U.S. economy perform under the pre-Fed gold standard?

The Federal Reserve System, established in 1914, recently marked its 100th anniversary. Every so often, someone expresses a longing for the “good old days” when the United States had no central bank and the dollar was anchored to the gold standard. Under a gold standard, the government promises to exchange its currency for gold at a fixed price; proponents argue that this prevents the government from printing money to finance expenditures, which could be inflationary. So, mainly the supply of gold, and not central bank policy or government spending, determines the value of the nation’s money.

The United States suspended the gold standard during the Civil War, but the Resumption Act of 1875 led to our return to the gold standard in 1879. The gold standard lasted through the creation of the Fed, loosened somewhat during the Great Depression, and eventually was abandoned in 1971.

How did the U.S. economy perform under the gold standard before the Fed was established? I turned to data in the NBER Macrohistory Database to find out.

The first graph plots the U.S. monetary gold stock and an index of the general level of prices from June 1878 to Dec. 1914. (The shaded areas indicate U.S. recessions.) Changes in the size of the gold stock were caused by additions to world gold supply (mainly from mining) and to gold flows associated with payments for international trade and investment. Over much of this period, especially after major gold discoveries increased world supplies in the 1890s, the monetary gold stock rose and the U.S. price level rose in response. However, over shorter periods of one to two years, the relationship between the size of the gold stock and the price level was not so close. For example, the price level rose sharply in the early 1880s and then abruptly declined, despite a smoothly rising gold stock.

The second graph shows the volatility of the price level during this period by plotting the year-over-year percent change in the price level (i.e., the inflation rate) alongside the gold stock. We can see the inflation rate fluctuated widely in this period, from about -10% in some years to about +10% in others. Over most of the period, the average inflation rate was low—close to zero—but the annual fluctuations in the rate were large, much larger than they have been in the United States in recent years. This price index for the 19th and early 20th centuries was constructed using different methods and with less information and precision than current price indexes use, which must be kept in mind when making comparisons between the pre-Fed era and modern times. However, beyond the volatility in the rate of inflation, the pre-Fed era was marked by several recessions, as well as serious banking panics and other financial crises. Thus, the historical evidence indicates that neither a gold standard nor the absence of a central bank guarantees economic or financial stability.

How these graphs were created: The “Academic Data” section of FRED contains data series constructed or contributed by academics and other non-official sources. The NBER Macrohistory Database includes historical series collected by researchers at the NBER and others. For these graphs, find the series “Monetary Gold Stock for United States” in the NBER Macrohistory Database under the subcategory “Money and Banking” or by using the tag “gold.” Select the range 1878-1914. Add the “Index of the General Price Level for United States” series to the graph (from the same database) and assign this series to the right y-axis in the “edit data series” window. For the second graph, simply change the units of the price level series to “Percent change from year ago.”

Suggested by David Wheelock.

View on FRED, series used in this post: M04051USM324NNBR, M1476AUSM027NNBR

Churning in the labor market

The U.S. labor market changes quite a bit, with hirings, firings, gains, and losses. The graph above represents this dynamic situation: In red (in negative territory) are all the job separations and in blue are all the new hires. The end result is the net creation of jobs. The series used here are not seasonally adjusted, so one can readily see strong patterns—both throughout the individual years and during recessions and booms. It is also remarkable how small the net effect is with respect to the two series. The labor market always moves, and the net gains happen at the margin. But it could be different, of course: Separations could occur mostly or even only during recessions and hires could occur only during booms. But the reason that doesn’t happen is that not every region or every sector of the economy follows the same pattern as the overall economy. Also, even during recessions, people frequently change jobs and businesses need new workers, just as businesses can close even during booms. There is a lot of churning out there.

How this graph was created: Look for “Hires: Total Non Farm” (level in thousands, not seasonally adjusted) and graph that series. Then add the series “Total Separations: Total Nonfarm” (also level in thousands, not seasonally adjusted). Transform the latter series by applying the formula -a. Then choose graph type “Area” with “Normal” stacking.

Suggested by Christian Zimmermann

View on FRED, series used in this post: JTUHIL, JTUTSL

Inflation across space

The national consumer price index averages the prices of many goods across the entire nation. But just because this index gets all the headlines doesn’t mean that all prices evolve in the same way. Certainly, there can be short-term differences in price. But it’s generally underappreciated that there can be longer-term differences as well. The graph above illustrates this by comparing a few MSAs in the United States: The differences in their price evolutions show that inflation at the local level is not entirely driven by a common currency. The same applies to countries under a monetary union, such as those from the European Monetary Union in the graph below. Put more simply, using the same currency does not mean the inflation rate will be the same everywhere. Why? First, the basket of goods used to compute the local price index may differ. Second, the relative prices of the local goods may vary, foremost housing and transportation. And third, the local business cycles are not synchronized, meaning that inflationary pressures may vary from place to place.

How these graphs were created: Play with the tags until you find your preferred set of series. For the first graph, it is useful to set the geography type to “msa” and choose “annual” for frequency. Then you can easily narrow down the set of series. For the second graph, “nation” and “eurostat” are good starting points. Once you have a list of series you’re happy with, select them and click on the “Add to graph” button.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CP0000FIM086NEST, CP0000FRM086NEST, CP0000GRM086NEST, CP0000NLM086NEST, CUUSA103SA0, CUUSA210SA0, CUUSA425SA0, CUUSA426SA0

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