Monday, December 28, 2009

Unemployment versus growth: once again, the easy explanation isn't the best one.

One piece of obvious conventional wisdom that I had been carrying around was that unemployment was higher in areas with high growth: that areas with high unemployment were areas with large influxes of population, and they therefore had high frictional unemployment, or had "oversold" themselves to potential workers. It seems like a good argument, and there are certainly a few data points to support it.
But you, my astute readers, know about "seems like a good argument" and "a few data points to support it". The actual scatter plot of the data is, as could be expected, scattered.
And, as is also often the case, there is a "three quarters" effect in here, although not a distinct one. Actually, It would be more a "five-sextet" effect. If we divide unemployment into high, medium and low, and growth into high and low...all of the five sextiles are occupied, except for "high-growth, low-unemployment". Utah, Texas and Colorado have high growth and medium unemployment, but there is nothing to the left of them.
Of course, in a normal economy, this graph might look different. So lets hope that we have a normal economy so I can find out! Also, I will have a job, and might not have time to scatterplot.
Incidentally, I found out this data several weeks ago, and just didn't bother to make a graph and post it. I actually have lots of stuff like that that I am sitting on!

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