A tight Labour Market drives Inflation through higher wages to attract scarce labour, as noted by William Phillips in 1958[1]. The inverse link between unemployment and inflation becomes apparent at times when other factors that influence inflation, such as oil prices, are more or less stable. As long as we are in one such period, we should ignore a tighter labour market at our own peril. To illustrate the Philips model, let’s take a broad measure of US unemployment, U6 (available...(continued)
This insight is part of Smartkarma. For more follow this link.
This post first appeared on Smartkarma | Intelligent Investing, please read the originial post: here