Michael Roberts explains why the US economy has reached a stalemate between rising inflation and employment
The US economy has a widening gap: between rising inflation on the one side and employment on the other. According to mainstream Keynesian theory, that should not happen. That’s because a weakening labour market should lead to a fall in wage increases and in consumer demand and price inflation will subside. The experience of the 1970s economies disproved that theory supposedly supported by the so-called Phillips curve (i.e. a trade-off between price rises and unemployment). Inflation erupted while unemployment rocketed. The decade of the 2010s after the Great Recession again disproved the theory, when inflation in the major economies subsided to near zero and unemployment rates were at record lows. In the post-COVID period from 2021 to…
