Inflation, unemployment and zero crossings

Unemployment and Inflation

Economic Reasearch and Data discusses the relationship between unemployment and inflation.

They point out that unemployment jumps during the recession and sends inventory into a deflationary spiral for a time. This chart would indicate a long period of deflation ahead. My question to myself is why did the deflation rate slow in the August CPI release.

First, notice that after the 1991 recession, both employment and deflation increased. More people working and more inventory growth. After the 2001, employment and deflation inverted. The reaso is simply that the Clinton era was built on smaller, more efficient government and greater use of techology. The Bush administration basically built on Communist big government fraud.

The turning points are called zero crossings because any restructuring requires some inventories to go to zero permanently, which temporarily inverts the demand curve. The lower the price, the less is sold.

After the restructuring, my naive prediction would say inflation rises with growth, but as we can see, productivity driven growth results in deflation, as per George Selgin.