Journal Article
How Much Has the Cooling Economy Reduced Inflation?
Abstract: Inflation still lies somewhat above the Federal Reserve’s 2% goal after slowing significantly since its spring 2022 peak. Analysis shows that two labor market indicators—the ratios of job vacancies to unemployed workers and of vacancies to effective job seekers—are particularly informative in determining excess demand’s impact on recent inflation. The measures suggest that declines in excess demand pushed inflation down almost three-quarters of a percentage point over the past two years. However, elevated demand continued to contribute 0.3 to 0.4 percentage point to inflation as of September 2024.
Keywords: Phillips Curve; inflation; job vacancies; labor market; job vacancies to unemployment ratio;
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Bibliographic Information
Provider: Federal Reserve Bank of San Francisco
Part of Series: FRBSF Economic Letter
Publication Date: 2024-11-18
Volume: 2024
Issue: 30
Pages: 5