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Stagflation is a macroeconomic phenomenon characterized by slow economic growth and high inflation. It is a rare occurrence, but it has happened a few times in recent history, most notably in the 1970s.

There are a number of factors that can contribute to stagflation, including:

  • Supply shocks: A supply shock is a sudden disruption to the supply of goods and services. This can be caused by factors such as natural disasters, wars, or trade disputes. Supply shocks can lead to inflation, as businesses pass on the higher costs of production to consumers.
  • Cost-push inflation: Cost-push inflation is a type of inflation that occurs when the cost of producing goods and services increases. This can be caused by factors such as rising wages, higher energy prices, or supply shocks.
  • Expansive monetary policy: Expansive monetary policy is a policy implemented by central banks to stimulate the economy. This can involve lowering interest rates or increasing the money supply. However, if expansive monetary policy is implemented too aggressively, it can lead to inflation.

Stagflation is a difficult economic condition to manage, as policymakers often have to choose between combating inflation and stimulating economic growth. If they focus on combating inflation, they may raise interest rates, which can slow economic growth. Conversely, if they focus on stimulating economic growth, they may lower interest rates, which can lead to higher inflation.

The effects of stagflation can be severe. It can lead to job losses, business closures, and a decline in the standard of living. Stagflation can also make it difficult for businesses to invest and grow, which can further slow economic growth.

There is no easy solution to stagflation. However, policymakers can take steps to mitigate its effects, such as providing financial assistance to businesses and individuals, and implementing policies to promote economic growth.

The number of applications per job posting surged by around 40 percent from a year ago on employment platform ZipRecruiter in the second quarter, said the company’s chief economist Julia Pollak.

The numbers have remained elevated in the months since, due to an increase in applicants and a drop in jobs advertised, she added.

“No one could have expected the sort of labor shortage re-hiring frenzy in 2021 to 2022 to last,” she told AFP.

Yet, despite the cooling, the share of openings is relatively high compared with before the pandemic, noted economist Jadrian Wooten of jobs platform Monster.

– Midpoint –

“At this very moment, we’re kind of exactly at the midpoint threshold,” Pollak told AFP.

Workers are quitting jobs at around the pre-pandemic rate and job growth hovers at 2019 levels.

But the market could be weaker than it seems.

Official job growth figures have been revised downwards — on average by 47,000 — for the past eight months consecutively.

One factor is the rapid pace of Federal Reserve interest rate hikes, which lift borrowing costs and can dampen the hiring associated with business expansion.

As it takes time for policy changes to affect the economy, companies and analysts flag uncertainty in the outlook.

If indicators like the employment of temporary workers and manufacturing overtime hours continue to fall, this could bode ill for the world’s top economy.

A job market slump can trigger a cycle where Americans cut back on spending, in turn reducing demand for goods and services.

– ‘On edge’ –

Simpson, who works part-time at a general goods store to make ends meet, said she is “on edge.”

Supervisors are pushing for staff to take fuller lunch breaks, she said, requiring them to clock out from their shift and eating into hourly pay.

“I’ve had in the past where my hours are just reduced without my wanting to,” she said of the past two years.

“And then eventually I’m just not on the schedule at all.”

Such situations nudge her to look harder for another job, and she is trying to land one that allows remote work.

“In this market, everybody wants to work from home,” she said, adding that such roles are “very competitive.”

– Ease of applying –

The job market has changed from the last two decades, said Wooten of Monster.

People previously had trouble changing jobs during slowdowns — such as in a recession — where fewer roles were available.

“Now it’s a little bit more challenging just because it’s so easy to apply for jobs,” he added.

“With remote work becoming an option in a lot of different industries, that allows more people to apply for jobs that they wouldn’t have applied for before,” Wooten told AFP.

Jobseekers could get some reprieve if policymakers signal they will start reducing interest rates.

This could boost investment and hiring, said Pollak.

Employers have been expecting a recession for over a year, “being very cautious and targeted and conservative when it comes to capital expenditures,” she added.

“They have very high pent-up demand for labor,” she said.

Shayne Heffernan

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