We're at serious risk of falling into an economic quagmire known as stagflation — and it could take years to escape the financial hardship
The current state of the US economy can best be described as an inflationary boom — strong GDP growth, low unemployment, and hot inflation. While the soaring prices may provoke a lot of ire from average Americans and politicians, an inflationary boom isn't the end of the world. That's because thehas the tools to manage these conditions—and carefully managing this situation will make sure unemployment stays low for a long time.
the specter of stagflation out of hand, but there are enough similarities between our current moment and the 1970s disaster that it's time to take stagflation seriously. or demand slump, prices will moderate as businesses attempt to attract consumers with lower costs. During a period of stagflation, by contrast, households feel the sting of a weakening economy—via rising unemployment, for example—but don't see the corresponding relief on costs.
The unemployment rate was also a key factor. In traditional economic theory, there is a point at which low unemployment kicks off high inflation, since employers have to ramp up wages to chase after a small pool of workers. This, in turn, forces businesses to increase prices to sustain their business, leading workers to ask for raises to cover the higher costs.
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