http://i41.tinypic.com/ddevly.jpg
http://i42.tinypic.com/14btax.jpg Resources: http://www.bls.gov/cps/prev_yrs.htm http://www.presidency.ucsb.edu/data/budget.php Credit: Robert P. Murphy (Lessons for the Young Economists) who provided small data, which led me to providing a larger data set with graphs.
If anyone has more data for Unemployment rates before 1948, I'll gladly add on. Otherwise, hopefully the graph looks all right.
Thoughts?
Looks very nice! (Note: not sure if you include that, but the unemployment calculation has changed significantly over the years.)
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Careful with that data. Correlation does not imply causation. In fact, there may be a case of inverse causation here. It's likely that the deficit increases because unemployment increases.
So is there a better source that has the new unemployment rate calculations?
Good point. Is there something that would make more sense?
Would you say there's a strong coincidence that unemployment rises because the Federal deficit increases holding all else equal?
Since 1930:
http://i42.tinypic.com/e9vlvc.jpg
http://i44.tinypic.com/96fhhw.jpg
Sources:
http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
http://www.bls.gov/cps/cpsaat1.pdf
Resources: http://www.bls.gov/cps/prev_yrs.htm http://www.presidency.ucsb.edu/data/budget.php
http://www.bls.gov/cps/cpsaat1.pdf http://www.hyperhistory.com/online_n2/connections_n2/great_depression.html
There's a correlation between the two sets of data, so you're not wrong to present them that way. In fact I was surprised that Wheylous threw "correlation does not equal causation" at you because neither you nor the data claimed any causation in the first place, so instead of you backing off to a correlation of the data in light of his comment, you backed away from a correlation at all.
I just thought it would be fun to put the data together from the 1930's after seeing Robert Murphy Budget Deficit vs Unemployment Rate during the Great Depression in his book. I backed away from the correlation because it remain seened that my intentions were to prove that unemployment rate rise due to budget deficit increasing and is involved in some way. But after Wheylous made his point, I completely disregarded that correlation of deficit increasing because unemployment increases. I was trying to get an answer on if there's any sort of coincidence or factor of deficit spending causes some unemployment to present. But the fact that there is a correlation between the sets of data and my intentions are clear, then I'm not wrong to present them that way like you said.
What I would do in this case is this:
Plot the spending of the each year vs. the unemployment of each year and do a regression.
Then plot the unemployment of the previous year vs. the spending of the current year and do a regression.
I expect that the second graph will have a stronger correlation. This means that higher unemployment leads to the government spending more money to try to offset the unemployment (which very much makes sense, and in this case could very well be causation, not correlation).
I'm interested in seeing this. Do you have an excel with the data?
Yeah, I have the excel with the data.
Input Y value: Spending (Outlays) vs Input X value: Unemployment
Not sure how I can plot the unemployment of previous year vs the spending of the current year to do a regression.
Typically, when someone asks "do you have the data" they mean "can you post it online so I can mess with it?"
Ha. It's attached. I'm excited to see what you'll do with the data.
It's on sheet 10. I placed the same data vertically and horizontally. The graphs and everything should be on sheet 1.
Federal Funds Rate:
http://www.federalreserve.gov/datadownload/Output.aspx?rel=H15&series=c7ca9f58d350a500bb83e230e208cf9b&lastObs=&from=&to=&filetype=csv&label=include&layout=seriescolumn
Federal Budget Receipts and Outlays:
http://www.presidency.ucsb.edu/data/budget.php
Historical Unemployment Rate:
http://www.bls.gov/cps/prev_yrs.htm
Any progress made Wheylous? Or did the attachment not work?
I find the graph in the OP to be terribly confusing. When the deficit goes down, unemployment goes up? Doesn't that imply that we want the deficit to be as large as possible?? Also, what does -5% of GDP mean? How can you have a negative percentage of a simple magnitude like GDP?
Clayton -
I just went according to this:
I took the the negative where outlays > receipts. The negative GDP% represents the deficit going up. The positive GDP% represents the deficit going down. Robert P. Murphy did the complete opposite in his book. He put the surpluses as negatives and deficit percentage as a positive. I assume I messed up, but I couldn't figure out why Murphy did that. My credibility as you see is poor, so I wouldn't mind being corrected if I did this wrong.