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All of the below are for the period 2000-2010 and, except for the the unemployment rates, all have been indexed for convenience and comparative purposes (2000=100).

The sources for all of the charts are the U.S. Bureau of Labor Statistics and the Japanese Statistics Bureau of the Ministry of Internal Affairs and Communication.

First up is a chart showing nominal wages in the U.S. and Japan. They increased steadily and significantly in the U.S. and fell moderately in Japan:

Dan Alpert Imahe

Next, let's look at inflation (deflation) in both countries during the same period. Note how it, unsurprisingly, mimics the above nominal wage chart:

Dan Alpert Image

Overlaying the above to data series produced real wage growth. This is where things get interesting, as real wages in both countries are pretty much flat (and in the U.S. they are only up a tad because of the period of actual deflation the U.S. already experienced during the Great Recession):

Dan Alpert Image

Finally, we have the issue of unemployment in both nations. I will recite the "Japan's official unemployment number is heavily engineered and unreliable because of the huge number of temporary and part time workers, and besides the Japanese just don't tolerate unemployment" line to defuse critics.

But really, that's an old saw that is becoming increasingly toothless in light of the huge gap between U.S. U-3 (unemployment) and U-6 (underemployment), as well as the United States’ own volume of temporary and part time workers (over 19% of those we consider employed are part time, for example):

Dan Alpert Image

Yes, the Japanese have not been very good at "tolerating" unemployment. The U.S. (and Europe) apparently excel at it by contrast.

The question, yet to be fully answered, is: Does U.S. unemployment merely reflect the "banking" of what will be inevitable wage deflation, so that the majority in the labor force can work at wages near, and prices don't plummet from, current levels?

We believe 2012 will begin to show us the answer.

Read the original article on Westwood Capital. Copyright 2011.