It is measured as the annual percentage increase in prices and the most often quoted figure is the annual change. The prices inflation usually measures are retail prices. Unemployment is one of many factors that impact inflation. Typically, unemployment and inflation are opposites except in instances of stagflation where these two variables rise together. If unemployment goes too high, inflation goes down, because high unemployment drives wages downwards. Price decreases follow because goods are being produced so economically that prices can fall and producers can still make a profit. This generally happens after major productivity enhancements as Nussbaum points out in his article.
Unfortunately, factors other than productivity such as higher energy and commodity costs are having a significant impact on inflation (Kirchhoff and Hansen, 2004). The median forecast is for the consumer price index to rise three percent in the twelve months ending in September 2004 and 3.1% in the year ending in December 2004. Earlier projections had been 2.4% and 2.6%. Whether inflation decreases or decreases depend on if the factors pushing inflation higher are "transitory" or permanent.
In Nussbaum's productivity analysis everyone is a winner. Productivity is about efficiency that benefits corporations as well as consumers and workers. Corporations derive more profits from lower labor costs and as costs decline, all consumer benefits from the resulting cheaper goods and services. Decreases...
In the coming year, perhaps the United States will experience the results that Nussbaum has predicted. However, to date, Nussbaum's predictions have been thwarted by businesses that have been reluctant to increase their labor force and inflationary pressures beyond labor costs and productivity.
Bibliography
Inflation - explanation. Retrieved October 17, 2004 from Web site: http://www.bized.ac.uk/virtual/economy/policy/outcomes/inflation/inflex.htm
Kirchhoff, S. And Hansen, B. (2004, August 22). Economists dial back growth forecasts. USA Today.
Retrieved October 17, 2004 from Web site: http://www.usatoday.com/money/economy/2004-08-22-econ-survey_x.htm
Nussbaum, B. (2004, March 22). Where are the jobs? Business Week. Retrieved October 17, 2004 from Web site: http://www.businessweek.com/magazine/content/04_12/b3875601.htm
September job growth weaker than expected. (2004, October 8). USA Today. Retrieved October 17, 2004 from Web site: http://www.usatoday.com/money/economy/employment/2004-10-08-unemployment-sept_x.htm
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