Friday, November 14, 2014

Inflation vs. Unemployment

The following scatter chart shows the annual change in the consumer price index (left scale) compared to the average unemployment rate over the previous year (bottom scale).

Click to enlarge.

There are three kinds of people in the world. Those who think:

1. A low unemployment rate must always create high inflation.
2. A high inflation rate must always lower unemployment.
3. Bond yields must always rise as the unemployment rate falls.

Okay, that might be just one kind of person. There are probably more kinds of people come to think of it.

Too much sarcasm? Is the bubble about to pop?

Source Data:
St. Louis Fed: Custom Chart

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