Why Very Low Unemployment Has Not Been Inflationary

Review our past State of the Economy blogs and you will find a consistent message. Low unemployment should put upward pressure on the price level. It hasn’t. This morning I read this explanation in The Wall Street Journal. I think the blog explains the Federal Reserve’s dilemma and why the improvement in employment has not increased inflation yet. Note it was written in June, and it was written by AllianceBernstein, L.P. AllianceBernstein is an investment company with several mutual funds. The information remains relevant because unemployment has continued to decline, and the core price index has remained stable since it was written. Unemployment dropped to 4.1% in October and the PCE (inflation) remained at 1.3% in September. (October’s figures will be posted November 30th.)

AllianceBernstein Blog