Low-paid jobs may explain flat Phillips curve – research
As recovery continues, this phenomenon should dissipate, authors say
The flattening of the Phillips curve in the US may be caused by a recovery characterised by low-paid jobs, research published by the Federal Reserve Bank of San Francisco says.
In Has the Wage Phillips Curve Gone Dormant?, Sylvain Leduc and Daniel Wilson analyse the reasons why the inverse relationship between unemployment and inflation appears not to be working in the US. Unemployment has dropped to 4.2%, but, contrary to conventional economic thinking, inflation remains below the 2% target.
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