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The unemployment bathtub


Economists often find a bathtub to be a useful metaphor for the behavior of unemployment. There’s some inflow of newly unemployed workers and some outflow as workers find jobs. A classic way to measure the inflow has been with initial claims of unemployment benefits, the blue line, in which we see spikes at the start of each recession. This inflow of newly unemployed persons initially reduces the mean duration of unemployment, the green line. But the green duration line rises as the blue initial claims line falls—since people who become unemployed early in the recession and remain so are unemployed for a while by the time the recession winds down. Every recession follows this pattern: Claims peak, then unemployment peaks, then duration peaks. The logic is essentially that of the bathtub: First it fills quickly; then, after some time, it begins to drain. But as this is happening, those left in tub have been there longer and longer.

How this graph was created: Search for and select the 4-week moving average of initial claims. Set its units as an index with scaled value of 100 at the 2007 pre-recession peak. Then use the “Add Data Series” option to add the other two series: the seasonally adjusted civilian unemployment rate (with the same units as the first series) and the seasonally adjusted mean duration of unemployment (with the same units as well).

Suggested by David Wiczer

View on FRED, series used in this post: IC4WSA, UEMPMEAN, UNRATE


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