publication . Article . Other literature type . 2011

Unemployment, labor costs, and recessions: implications for the inflation outlook

Fee, Kyle; Schweitzer, Mark E.;
Open Access
  • Published: 27 Sep 2011 Journal: Economic Commentary (Federal Reserve Bank of Cleveland) (issn: 0428-1276, eissn: 2163-3738, Copyright policy)
  • Publisher: Federal Reserve Bank of Cleveland
<jats:p>Economists have been arguing about the connection between unemployment and inflation for decades. Critics claim that the connection is unreliable and leads policymakers astray, while others argue that the relationship is useful for forecasting. We examine the more direct connections between elevated unemployment levels and the rate of increase in wage and labor costs, more generally. We find that wage and labor cost growth has declined markedly following recent recessions. It has again declined sharply in the most recent recession. We also find that compensation typically remains subdued during the initial phases of recent recoveries. This is again the c...
free text keywords: Recessions; Inflation (Finance); Inflation targeting, Inflation, media_common.quotation_subject, media_common, Recession, Unemployment, Rate of increase, Inflation targeting, Keynesian economics, Economics, Wage, Misery index
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