Stagflation may become a term making an unfortunate return to the news this fall. Stagflation is a term with its origins in the 1970s and describes a situation where inflation rises while unemployment is also high and persistent.
As inflation concerns continue to hammer consumer confidence, the Labor Department reported on Thursday that new jobless claims came in at the highest number since August and 30,000 more than expected.
The seasonally adjusted number of initial claims rose to 351,000 over the last week. The expected number had been estimated at 320,000. The number of claims the week prior was 335,000. The week’s number was the highest since 354,000 new claims for benefits were filed during the week that ended August 21.
Current total jobless claims sit at 2.8 million, compared with 1.7 million before the COVID-19 pandemic.
Meanwhile, inflation is at 5.3 percent over the last twelve months and hit a 13-year high in August. Job growth was reported at its lowest rate since the beginning of the year.
Nouriel Roubini, a New York University economist, wrote last month that there is a possibility that “mild” stagflation is already happening in the economy. Roubini stated that although the government and the federal reserve inject “massive monetary, credit, and fiscal stimulus” into the economy, inflation is rising, and growth is “slowing sharply.”
The Biden White House urges Congress to pass a $3.5 trillion spending bill through budget reconciliation and a $1.2 trillion bipartisan infrastructure bill. Almost all Republicans and some moderate Democrats have expressed concerns that the proposed massive government spending will worsen the rising price inflation.
The administration has also received criticism over the federal enhanced unemployment benefits program that expired in August. Some economists and lawmakers have said that the generous federal benefit caused many Americans to go back to work.
When many industries nationwide are continuing to experience significant worker shortages, the White House has recently announced new vaccination mandates that will apply to private employers of more than 100 workers. The mandate is expected to negatively impact the ability of employers to attract and retain employees.