Examining the behaviour of inflation and unemployment- known as the Phillips curve (PC)-the following conclusions can be reached: While low unemployment still pushes inflation up and high unemployment pushes it down, the slope of the Phillips curve, i.e., the effect of the unemployment rate on inflation given expected inflation, has substantially declined in the recent past.

Wage inflation and the unemployment rate (quarterly), 1960-2015 12 A A DD 10 A 1960s 4 Inflation = 10.5 - 1.24*Unemp 4 140 M 44 R= 0.76 A 8 DA A A MA A A 1970s, 80s and 90s Wage Inflation Two Years Ahead 6 A Inflation = 5.30 - 0.05* Unemp R3 = 0.00 A A A AA A A 94 A DIDD 604 2024 440 2000 to 2015 4 44 4 O Inflation = 4.58 - 0.37* Unemp 2 4 O R2 = 0.71 oo Po 0 N 6 8 10 12 14 Civilian Unemployment Rate 1960s 4 1970s, 80 & 90s o 2000 to 2015 Source: FRED