As today, inflation in the first half of the
1960s routinely undershot two per cent.
The change for inflation, however, occurred in
early 1966 just after unemployment fell below
four per cent. The data showed inflation
from January 1960 and January 2010 , both similiar
It took 76 months from the start of the 1960s for core
CPI to sustainably rise above two per cent. The
drop in the unemployment rate below four per
cent marked a signifcant turning point as it
indicated that aggregate demand had risen
well above the economy’s 4.5 per cent
potential rate of growth at the time.
As a result, a sudden and sustained uptick in
inflation followed back then. However todays
economy , with a vast portion of
individuals being temporary or contracted,
shows that unemployment , though dropping
does not follow the 1960’s knee jerk effect
in the same manner.