Forget inflation: Stagflation, the ugly reality where both prices and job loss are on the rise, is our bigger threat – by Armine Yalnizyan (Toronto Star – June 1, 2022)

https://www.thestar.com/

You thought inflation was bad? Buckle up. This ride is about to get bumpier. With every passing month, inflation — seen in higher food, gas and housing costs — is squeezing your budget harder, with no end in sight.

We all want someone to do something, but the “cure” for inflation — rate hikes to cool higher prices — is almost guaranteed to be worse than the disease. Rising prices and rising joblessness is the new fear, now that it’s clear inflation isn’t a passing problem, due to wave after wave of shocks to the global economy.

Now the word “stagflation” is making a comeback — the ugly reality where both prices and job loss are on the rise as economies stagnate. Usually unemployment moves in the opposite direction from inflation; when prices rise it’s usually because the economy is running hot, which means there are more jobs.

When they move in the same direction, it’s a tougher problem to solve, because policies that cool prices usually create more job loss, but fixes for unemployment like more government spending or tax cuts can add fuel to inflation.

For the rest of this column: https://www.thestar.com/business/opinion/2022/06/01/forget-inflation-stagflation-the-ugly-reality-where-both-prices-and-job-loss-are-on-the-rise-is-our-bigger-threat.html