Saturday, December 9, 2017

Quantum Unemployment

Call me the duplicator: See a graph, make a graph.

Look up Okun's Law, and this graph comes up:

Graph #1: Okun's Law. Source: Wikipedia
I always want to see how it works: What is the data? What are the units? Can I duplicate the graph? It's an automatic process. I don't decide that I want to do it. I just do it. I don't know why. But anyway, the data series are Real GDP, and UNRATE at FRED. The values are quarterly. The unit for GDP growth is "percent change", and the unit for unemployment is just "change" because it starts as percent. So yeah, I can do that.

Here's what I got:

Graph #2: Okun's Law at FRED
The horizontal black line on the second graph is the X-axis, not the trend. Ignore it. Look at the shape of the cluster of blue dots: high on the left, low on the right. A "best fit" trend line would run from high on the left to low on the right, just like the trend line on the first graph. So I'm satisfied: I duplicated the graph.

I even got blue dots! My dots are all the same color, all faint blue. Some of them look dark because they overlap. There are more dots in the middle of the cluster than elsewhere, and they overlap and it makes them look dark blue. If you look at the first graph, there are more dots in the middle of the cluster there, too.

So that's what I saw when I looked at my graph. And then I noticed something odd: My dots are all arranged in columns, with blank space between the columns. You probably noticed it before I did. It's like unemployment always makes a quantum leap from one level to the next, as you go from left to right.

The other graph doesn't show that.

No, I know what it is: FRED rounded the unemployment numbers to one decimal place. You can see it, from the way the columns are spaced. And sure enough, if you hover over the graph at FRED it shows the unemployment values rounded to one decimal place.

Damn, I thought I was on to something with "quantum" unemployment!


Philip said...

Quantum jumping to conclusions!

The Arthurian said...

Good one, Philip!

My wife says "It's not a scatter plot any more!"