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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

How labor market flows changed

After the most recent recession, the volume of workers switching their employment status from unemployment to non-participation (that is, not in the labor force) and vice versa increased dramatically, reaching levels not seen in the previous two recessions.

The first graph shows the flows from non-participation into unemployment (NU) and from employment into unemployment (EU), both normalized by population. In the past, these two flows closely tracked each other and the contribution of both non-participation and employment to unemployment was roughly equal. However, in the Great Recession, the contribution to unemployment from both series increased significantly, with the contribution of non-participation becoming substantially larger, peaking far above the EU flow and taking a much longer time to return to lower levels.

The second graph shows the flows of workers that have switched from employment and non-participation into unemployment as a fraction of total population. We can see that the flows from employment to non-participation (EN) have decreased in the past recession, a behavior in line with previous episodes. The flows from unemployment into non-participation (UN) show a much stronger response, increasing to historically high levels after 2008.

The fact that both UN and NU flows are larger than usual, but of a roughly similar magnitude, implies that the labor market has become more dynamic on that margin. The levels of labor market variables (employment, unemployment, and non-participation) are very sensitive to the dynamics of labor market flows. Therefore, understanding the causes for the recent evolution of the UN and NU flows is central to understanding the dynamics of labor market variables in the past recession.

How these graph were created: Go to the labor force status flows category. For the first graph, find the flow called “Labor Force Flows Employed to Unemployed” and graph the seasonally adjusted values. Select the “Graph” tab and scroll down to the “Add Data Series” option. In the keywords box, search for “Labor flows,” scroll down to “Labor Force Flows Not in Labor Force to Unemployed,” and add the series as a new data series. Select the “Add Data Series” option again and search in the keyword box for “Civilian population.” Select the first series and add the data under the “Modify existing series option” for data series 1 and 2. Now, select “Edit Data Series.” Under the “Create your own data transformation” option, type the formula a/b and click “Apply.” Do this for each data series. Finally, restrict the time period to 1990 through 2014. To make the second graph, repeat this process but this time select the flows “Employed to Not in the Labor Force” and “Unemployed to Not in the Labor Force.”

Suggested by Maxiliano Dvorkin and Hannah Shell

View on FRED, series used in this post: CNP16OV, LNS17400000, LNS17600000, LNS17800000, LNS17900000


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