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Contrasting the U.S. and German unemployment rates


FRED’s rich set of international indicators allows us to compare the behavior of different countries over time. Here we contrast the behavior of unemployment in the U.S. and Germany. We use the OECD’s harmonized data series for both countries so that the population definitions are the same: Working age population = Active population + Inactive population. Active population = Employed population + Unemployed population. The harmonized unemployment rate is defined as the ratio of unemployed population to active population, and the resulting series are plotted in the graph. (The shaded recession bars for the U.S. are from the NBER and for Germany are from the OECD.) The data go back to 1991, but this graph starts in 2003, the period after the so-called HARTZ labor market reforms in Germany.

The graph highlights huge differences in the behavior of the two unemployment rates. In 2003 and 2004, Germany, but not the U.S., was in a recession. Its unemployment rate was much higher than—and for a while, double—the U.S. unemployment rate. But since the implementation of HARTZ IV, the German unemployment rate has been falling. HARTZ IV significantly reorganized and reduced the unemployment insurance program and narrowed the eligibility criteria. More interestingly, although both the U.S. and Germany entered recession around the same time in late 2007/early 2008, the two unemployment rates behaved quite differently: The U.S. rate skyrocketed and remained persistently high; the German rate kept declining for a while, had a relatively modest increase, then had a similar decline as before. By the end of the sample, the two countries had switched places: The U.S. looked like Germany and Germany looked like the U.S. in the early 2000s.

How this graph was created: As noted above, we want comparable unemployment series. We use the OECD harmonized series for the U.S.: USAURHARMMDSMEI. Add this series to a graph. Next, add the comparable German series by using the “Add Data Series” menu below the graph to search for and select DEUURHARMMDSMEI. Finally, add the indicator for Germany’s recessions: DEUREC. To make the graph more readable, use the right axis for this third series. Also, don’t forget to start the graph in 2003.

Suggested by Alexander Monge-Naranjo and Faisal Sohail

View on FRED, series used in this post: DEUREC, DEUURHARMMDSMEI, USAURHARMMDSMEI


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