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Karl Smith recently posted this graph showing the inverse relationship between real wages and durable goods sector hours worked:

Click to enlarge

He also inverted the real wage series, to make it easier to see the correlation:

Remember how conservatives used to mock that old NYT headline?

Prison Population Soars Despite Lower Crime Rates

I had a sudden vision of a puzzled reporter remarking:

Workers choose to work fewer hours, despite higher real wages.

Of course, real wages aren't the best indicator, wages/NGDP works better when you have supply shocks. But it's good enough for the period Karl Smith examined, and it was good enough when I investigated the 1930s:

Recessions are actually pretty simple. Nominal wages are sticky. So when NGDP falls you get fewer hours worked. Of course, this isn't true of all recessions-on occasion an asteriod impact will reduce hours worked by 10%. But not very often.

PS. The recent tsunami had no apparent impact on the Japanese unemployment rate.

PPS. Nick Rowe has done a number of posts arguing that recessions are almost inevitably due to monetary disequilibrium. Here's his latest.

PPPS. David Beckworth has a very good post showing why the Fed should welcome higher long-term interest rates.

Source: Yup, It's Your Father's Recession, And Your Grandpa's Too