Inflation and Unemployment

I have a bunch of meetings this morning — you know how those go. That will give me a chance to think about these graphs:

This is a graph of PCE core year-over-year inflation versus unemployment since 2007 (the scatterplot with headline rather than core PCE is a noisier version of this, but the basic pattern remains):

Inflation-Unemp-since-2007

The same graph since 2008 eliminates many of the observations in the upper left part of the graph:

Inflation-Unemp-since-2008

And, since 2009:

Inflation-Unemp-since-2009

This post was originally published at Economist’s View and is reproduced here with permission.

One Response to "Inflation and Unemployment"

  1. Ed Dolan
    EdDolan   October 24, 2012 at 5:52 am

    Let me know what you have thought when you have thought it. I am thinking that the Phillips curve is a good illustration of Goodhart's law–a statistical regularity that breaks down when you stress it by trying to use it as an instrument of control. Or are you thinking something different?