Wait. Did the Phillips Curve Just Make A Comeback?

The Phillips curve (no relation other than name) is the inverse observation between unemployment and inflation recognised by William Phillips.

The theory was discredited in the 1970’s stagflation.

(What the theory didn’t recognise is that the supply curve can move, too.)

But the theory seems to have made a comeback.

In the 00’s, house prices were through the roof.  I can recall a friend saying, “I can’t afford prices at these prices.”  Unemployment was also at an all time low.

Fast forward to today.  We have a weak economy, and house prices, which account for +30% of the typical income, are still falling. 

The Phillips Curve is relevant, and it has made a comeback.