The following charts look at unemployment versus both CPI inflation and Alternative CPI inflation. One goal of mine was to see how correlated unemployment was with inflation and deflation. There are some trends, but nothing that screams out in dramatic fashion as with a lot of our other comparative charts.
The only trends that appear to hold:
(1) Unemployment tends to be lower in periods of moderate to moderately high inflation, if we define this as inflation from 3% to 10%. Even during the housing boom with nearly 10% Alternative CPI inflation, we saw low unemployment due to high employment in fixed asset construction. High unemployment appears to be an issue both during the high inflationary period of the ’70s and early ’80s, and also the deflationary period after the housing bust.
Below is unemployment vs. official CPI inflation:
And here below is unemployment versus the Alternative CPI inflation:
