The FRED® Blog

The Phillips curve after the Great Recession

Posted on November 2, 2015

During the 1960s, some economists made the case that the Phillips curve—a negative relationship between the inflation rate and the unemployment rate—represented a tradeoff for policymakers. So, according to this view, a central bank could achieve permanently lower unemployment by accepting higher inflation. However, beginning with Milton Friedman in 1968, other economists made the case that the Phillips curve tradeoff was not permanent. According to this alternative view, the Phillips curve correlation might be observed in the data over some periods of time, depending on the types of shocks hitting the economy, but a central bank could not exploit a Phillips curve tradeoff to create permanently low unemployment. Then, beginning in the 1990s, New Keynesian economists propelled a resurgence of interest in the Phillips curve, which plays a prominent role in New Keynesian theory.

The graph shows the Phillips curve we observe in the data following the end of the Great Recession. The data run from June 2009 to August 2015, and the line connects the points in the scatter plot in temporal sequence running roughly from right to left in the graph. Over this period, the Phillips curve slopes the wrong way—a higher unemployment rate is associated with a higher inflation rate. Even if people may be waiting for a lower unemployment rate to produce higher inflation, this may never happen.

How this graph was created: Search the categories in FRED: Under the “Prices” heading, select “consumer price indexes” then “personal consumption expenditures: chain-type price index, monthly.” Set the sample as 2009-06-01 to 2015-08-01. Under the “Edit Data Series” option, change “Units” to “Percent Change from Year Ago.” This will yield a graph of the Fed’s chosen measure of the inflation rate over the post-recession period. Next, choose “Add Data Series” and search for and select “civilian unemployment rate, monthly, seasonally adjusted.” Now, edit this series by selecting the “Edit Data Series 2” option and setting the y-axis position to the left; select the “Graph Settings” option and set graph type to “Scatter.” Then choose “Edit Data Series 2” and set units to “Percent.” Finally, choose “Edit Data Series 1” and set line width to “1.”

Suggested by Steve Williamson.

View on FRED, series used in this post: PCEPI, UNRATE

Halloween candy

Posted on October 29, 2015

Halloween is upon us─the only time children are encouraged to receive candy from total strangers. And it feels like this ritual is becoming more important every year, which might put pressure on the market for candy. FRED does not have data about candy sales, but it does have a price index for it. If we compare that index with the general consumer price index, maybe we can unearth something about our hypothesis.

It turns out this is a ghostly idea: There’s literally nothing to see. Candy price data start in December 1997; so, after setting both series to 100 at that date, the current numbers are virtually indistinguishable. This may be due to uncanny luck, as candy prices were at times as much as 10% below general prices, including at the end of the last economic boom. So maybe this shadowy idea about candy price pressure applies only to the time since the Great Recession. Or perhaps our hypothesis simply has no bearing on the price of candy because candy supply can easily accommodate fluctuations in demand. All in all, nothing scary to report.

How this graph was created: Search for “candy” and the candy price index should be your first choice. Then add the CPI  series. Modify the latter’s units to show 100 in 1997-12-01.

Suggested by Christian Zimmermann

View on FRED, series used in this post: CPIAUCSL, CUUR0000SEFR02

The changing composition of U.S. trade

Posted on October 26, 2015

Over the past 30 years, the composition of U.S. trade among its partners has changed dramatically. New economic powers, trade agreements, technological advancements, and changes in policy preferences are all contributing factors. The four graphs in this post examine the evolution of imports, exports, and trade balances between the U.S. and four of its largest trading partners: China, Canada, Mexico, and Japan. The graph above shows trade patterns between the U.S. and China from 1985 to 2015. Both imports and exports have dramatically increased, but imports have outpaced exports, resulting in a large trade deficit. (See the green line, which corresponds to the right y-axis: Points below zero indicate a trade deficit.) This pattern is not the same for all trading partners, however. In the graphs below, imports and exports have increased for both Canada and Mexico as well, but they have remained relatively flat for Japan. Similarly, although the U.S. trade deficit has increased with Canada and with Mexico, it has done so at a much slower pace than it has with China. After the latest recession, trade deficits have moderated, which is most noticeable for U.S. trade with Canada, which has become almost balanced.

How these graphs were created: Search FRED as follows: For imports, search for the “U.S. imports of goods from [country x] customs basis.” For exports, use the “Add Data Series” option to search for and add “f.a.s. basis series for [country x].” Use the “Create your own data transformation” option (under the “Edit Data Series” section) to transform both series to natural logarithms (logs). For the third series, use the “Add Data Series” option to re-add the imports series as a new series; then, use “Add Data Series” option again to add the export series, but under the “Modify existing series” option for Data Series 3; finally, under the data transformation option, type “b-a” into the transformation field and set this third series to appear on the right y-axis.

Suggested by Maxmiliano Dvorkin and Hannah Shell.

View on FRED, series used in this post: EXPCA, EXPCH, EXPJP, EXPMX, IMPCA, IMPCH, IMPJP, IMPMX


Back to Top

Subscribe to the FRED newsletter

Follow us

 

Need Help?

Questions or Comments
FRED Help
Legal
Privacy Notice & Policy