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[daviddelosangelesbuendia-blog]

U-3 vs. NGDP Phillips Curve

If one plots Nominal Gross Domestic Product (NGDP) over time on a quarterly basis between January 1949 and July 2017 and U-3 unemployment rate over the same period the plot reveals not clear pattern [1]. However if the data is plotted on a Year Over Year Percent Change basis an inverse relationship is strongly suggested [2]. In this period (275 quarters) the median YOYPC for U-3 -5.1% (25th Percentile =-11.3 %, 75th Percentile = 7.3 %) and the median YOYPC for NGDP was 6.3% (25th Percentile = 4.3 %, 75th Percentile = 8.3 %). The Pearson Product Moment Correlation (PPMC) coefficient of correlation (R2) is -0.59 (p<0.00001). That would suggest a very strong basis for your curve (The Spearman Rank Correlation R2 = -0.4 p < 0.00001). However rather than a second order curve, it appears to be a first order curve. The correlation is actually stronger if only the last 20 years of data is used Pearson Product Moment Correlation (PPMC) coefficient of correlation (R2) is -0.76 (p<0.00001 n = 81) [3].