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.