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# Inflation isn't dead, but is it in sleep mode or secular stagnation? I believe inflation isn't dead but it is in sleep mode or secular stagnation now.  US Inflation would not move out of  this low inflation situation until young workers employment rate gets improved. Right now, the rate (black line in chart below) is flat( < 36%). Percentage change of Unit Labor Cost (red line in chart below) from young workers is a major driving force for inflation(blue line in chart below).  ULC(Unit Labor Cost) is calculated as the ratio of total labor costs to real output.

The young-worker employment rate can be calculated by the ratio of employment level 16 to 34 years old workers in labor force(black line).  This age curve of young workers ramps up from year 1962 to year 1980 due to more young baby boomers in labor force, then falls into sleep mode due to less young baby boomers. Current ratio of young workers is about 35%-36%. The peak of the ratio is about 51% in year 1980.

Inflation(%P,  percentage change of price level from a year ago) can be decomposed into 2 components: %ULC(Percentage change of Unit Labor Cost ) and %ULP (Percentage change  of Unit Labor Production).  ULP(Unit Labor Production) is calculated as the ratio of nominal output to total labor costs.

Inflation decomposition is shown from accounting identity "PQ=GDP" as follows.

P = GDP/Q  = (Wages/Q)(GDP/Wages)

Thus,  %P =%(Wages/Q) + %(GDP/Wages)  (omitted term %(Wages/Q) %(GDP/Wages)  since it is  near zero)

Blue line = %P = inflation
Red line = %(Wages/Q) = %ULC
Green line = %(GDP/Wages) =%ULP
Blue line = red line + green line 