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The unusual duration of unemployment The scars of the Great Recession

The graph above shows the unemployment rate (right axis) and the average duration of unemployment (in weeks, left axis). It’s well known that the unemployment rate is currently very low. However, the duration of unemployment since the Great Recession has never been longer.* What’s going on?

The graph below has an answer. The share of long-term unemployment is significantly higher than in any other post-WWII period. Indeed, those unemployed for more than 6 months (in green) still represent over 20% of the unemployed, after a peak of over 45% in 2011. This share increases after recessions, but the most recent recession was deeper and much longer than the others. It’s also well-known that the long-term unemployed have a much harder time finding a job, leading to a catch-22 situation for them. And thus their numbers still persist at a high level.

How these graphs were created: Search for unemployment duration and click on the series name. From the “Edit Graph” panel, open the “Add Line” tab and search for “unemployment rate.” Open the “Format” tab and place the axis for the second line on the right. For the second graph, look at the notes for the duration series, where there is a link to the release table. From there, check the relevant series, click on and “Add to Graph.” From the “Edit Graph” panel, open the “Format” tab, change graph type to “Area, Stacked,” and finally move the “less than 5 weeks” series up so that they are all properly ordered.

*At least in the postwar era.

Suggested by Christian Zimmermann.

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

Who pays what in federal taxes?

In principle, we all have to pay taxes. That includes individuals and corporations. The graph attempts to answer the question of how much each source provides in federal taxes. It’s clear that individuals pay the lion’s share (which doesn’t include social security contributions), and the second-largest source is corporations.

The third-largest source is tariffs on imported goods and taxes levied at production. Now, who precisely “pays” these types of taxes is more difficult to determine, as it depends on the price elasticities involved. Let’s say a tariff increases or a new tariff is imposed. Does the seller absorb it or does the seller roll it over to consumers through a higher price tag? The answer depends on how sensitive each party is to price changes.

The smallest source of taxes is the entities abroad category. These entities may be expats filing their income taxes or businesses with some ties to the U.S. that must pay taxes on their activities.

What are the overall trends? It’s clear that taxes from individuals have had a tendency to increase. Taxes from tariffs and such have tended to decrease, although they may soon go back up. Corporate income taxes have also decreased, proportionally, and are now very close to being overtaken by taxes from tariffs and such. Note also that corporate income taxes dip significantly during recessions: These taxes are mostly based on profits, and profits don’t usually rise during downturns. Finally, taxes from foreign entities are small but have recently started to become noticeable.

How this graph was created: Search for “federal tax receipts” and click on any of the relevant results. Scroll to the bottom of the note and click on the release table. Check the series you want and click on “Add to Graph.” Because the latest taxes on corporate income weren’t yet available as this post was being written, we adjusted the date to remove the last quarter. From the “Edit Graph” panel, change type to “Area” and units to “Percent.”

Suggested by Christian Zimmermann.

View on FRED, series used in this post: A074RC1Q027SBEA, B075RC1Q027SBEA, W007RC1Q027SBEA, W008RC1Q027SBEA

How expensive is it to service the national debt? A battle between interest rates and growth rates

The U.S. federal debt has been rising steadily since the Great Recession and is currently 103 percent of GDP. So let’s enlist FRED to help us study the sustainability of this debt by looking at how much it costs to service it.

Neil Mehrotra recently described the cost of servicing public debt as dependent on the gap between the real interest rate on debt and the growth rate of real GDP: This gap captures the difference between the interest the government must pay to its lenders, in real terms, and the pace at which U.S. income increases. If U.S. income increases more rapidly, then interest payments on U.S. debt shouldn’t be a major burden.

The graph plots this measure of the cost of servicing the debt. (Here, the growth rate of real GDP is the sum of real GPD per capita growth and population growth, and the real interest rate is the difference between the interest rate on a 10-year Treasury bond and the CPI inflation rate.) The graph presents an interesting picture. In the years since the Great Recession, the cost of servicing public debt has been negative, which means that the burden of U.S. public debt is low. Since 1960, negative debt servicing costs have occurred nearly 63 percent of the time; and the average cost of servicing debt is -0.67%. In fact, since the 1960s, the only time period in which the real interest rate was consistently greater than the growth rate of real GDP was from 1981 to 1995.

Interest rates have been low since the previous recession, but they have been on an upward trajectory lately, which may increase the cost of servicing the federal debt.

How this graph was created: Search for and select the series “Constant GDP per capita for the United States.” From the “Edit Graph” panel, set the frequency to “Annual.” Then add three more series in this order to the same line: “Population Growth for the United States,” “10-Year Treasury Constant Maturity Rate,” and “Consumer Price Index for All Urban Consumers” (all at anual frequencies). Set the units for constant GDP per capita to “Percent Change from Year Ago” and the units for CPI inflation to be “Percent Change.” Then, in the Formula bar, enter the formula c-d-a-b.

Suggested by Asha Bharadwaj and Maximiliano Dvorkin.

View on FRED, series used in this post: CPIAUCNS, GS10, NYGDPPCAPKDUSA, SPPOPGROWUSA

Spooked by prices this Halloween? FRED shines a light on consumer and producer prices of candy and costumes

If you’ve been in any grocery stores, pharmacies, toy stores, or supermarkets recently, you’ve seen Halloween in all its glory. According to the National Retail Federation, Americans are expected to spend $9 billion on Halloween fun. How does the spike in consumption of candy and costumes affect prices for consumers and producers? As it turns out, the consumer price index appears to be more volatile than the producer price index.

The graph shows the consumer price index (CPI) in purple and the producer price indexes (PPI) in orange and black for candy and costumes. (Sadly, CPI for costumes isn’t available.) The PPIs don’t vary much, but the CPI does. After all, the prices of sugar, cloth, and other inputs exhibit less holiday-related seasonal variation than the prices producers can charge around those holidays. The PPI for costumes and vestments varies the least, which isn’t surprising: Fewer seasonal factors such as weather or harvest schedules impact the prices of inputs for costume production. The PPI for candy shows slightly more variation, yet displays less of a seasonal pattern than the CPI for candy, which tends to spike each March and September.

Candy prices are expected to rise in the spring and fall, as demand rises to fill Easter baskets and trick-or-treat bags. But savvy shoppers who consult FRED can see that the worst of the Halloween price hikes seem to end by October. It’s the early candy shoppers who often take the hit every September when prices are at their scariest.

How this graph was created: Search for “CPI Candy” and select the monthly, not seasonally adjusted series. From the “Edit Graph” panel, change the units to “Index,” selecting the date 2011-12-01 (to align with the next series). Then click “Add Line” and search for “PPI Chocolate” and select the relevant series. Click “Add Line” again and search for “PPI Vestments and Costumes” and select the relevant series. Change the start date to 2011-12-01.

Suggested by Maria Hyrc and Christian Zimmermann.

View on FRED, series used in this post: CUUR0000SEFR02, PCU3113531135, WPU0381044115

The business behind the trade balance Why trade deficits decrease in recessions and increase in booms

How does the trade balance relate to economic activity? The graph above shows the U.S. trade balance for goods and services as a percentage of GDP. Obviously, there was a surplus initially and now there’s a persistent deficit. Beyond that, it looks like every time there’s a recession, the trade deficit tends to decrease. (Or, if we go farther back in the past, the trade surplus tends to increase.) Obviously, many things affect the trade balance, but let’s see what FRED can show us about this relationship.

A good way to reveal how series may be correlated is to look at scatter plots. Instead of relating economic data to dates, scatter plots relate two data series to each other, one on each axis. The graph above does this with changes to the trade balance ratio on one axis and percent changes to real GDP on the other axis. What may look like a random assortment of dots actually has some information. Imagine the graph is divided into four quadrants and then consider where the dots are located. The upper right and lower left quadrants have fewer data points than the other two, highlighting that there is indeed a negative correlation: That is, when real GDP tends to increase, the trade balance tends to decline—that is, trade surpluses decrease or trade deficits increase.

Why is that? First, consider that the trade balance is net exports—that is, exports minus imports. Imports are highly correlated with GDP, while exports are less so. We see this in the graph above, which plots imports. This time, the upper left and lower right quadrants are the most populated. This highlights the positive correlation: That is, when real GDP tends to increase, imports do as well. Thus, over the business cycle, it is really imports that drive the trade balance: When the economy is doing well, producers need more intermediate goods, and imports are mostly intermediate goods. Also households consume more, and a share of those consumption goods are imports. If you graph exports, the correlation is much harder to see. Exports depend much more on what happens abroad, which isn’t that well correlated with domestic activity.

How these graphs were created: First graph: Search for “net exports” and select the quarterly series. From the “Edit Graph” panle, add GDP and apply formula a/b*100. Second graph: Use the first graph and change the sample period to start in 1954. From the “Edit Graph” panel, change the units to “Change.” Add a line by searching for “real GDP,” change its units to “Percent change,” open the “Format” tab, and switch the type to “Scatter.” Third graph: Use the second graph but with real imports in percent change.

Suggested by Christian Zimmermann.

View on FRED, series used in this post: GDP, GDPC1, IMPGS, NETEXP


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