Monday, November 16, 2015

How is the Phillips curve doing?

Here we have inflation, in the form is the implicit price deflator change YoY, in blue.  The red is the unemployment rate.  And we see how they relate in  the cycle.  The Urate goes down, along with inflation after the recession, but soon inflation jumps while Urate continues down. Then price distortion causes a recession.

This is a regime shift, folks, there is no linearity across the cycle.  Level matters less than change,



Right now, at the end of the chart, inflation  has run  its course and we seem to be entering recession territory.  Likely after the weak holiday season, the Urate will jump up and we will have a small recession, in early 2016.  Could this recession be much larger?  It depends upon how much fraud is uncovered in the current DC regime.

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