U.S. Inflation and Unemployment

January 16, 2013

U.S. inflation is significantly under long-term norms.  Consumer prices rose 1.7% between the end of 2011 and end-2012.  By comparison, the CPI rose 3.0% in the previous twelve months.  Over the five years to December 2012, CPI inflation averaged 1.8% per year compared to average inflation of 3.0% during the past 30 years and 3.6% per annum over the last 65 years.

U.S. unemployment is even more disconnected from long-term norms than inflation.  The average jobless rate over the past five years was 8.3% versus a mean unemployment of 5.2% during the five years through December 2007.  Unemployment has averaged 6.3% since end-1982 and 5.8% over the last 65 years.

U.S. monetary officials are currently committed to the 0-0.25% federal funds target so long as they see unemployment above 6.5% and the personal spending price deflator no higher than 2.5%.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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