WELCOME BACK, CARTER! Is Stagflation Returning in 2022?
During the late 1970s, American families experienced stagflation—a combination of economic stagnation and significantly higher inflation. By the summer of 1980, unemployment hit 7.8% and the economy was actually shrinking. On the year, inflation spiked 12.3%.
Some fear that today’s slowing economic growth (2.3% annualized last quarter) and the steepest price hikes in 40 years portend a return to stagflation.
Real weekly earnings have plummeted more than 6% since the middle of last year, and the cost of living eclipsed wage increases. Dramatic price hikes in housing, rent, vehicles, gasoline, and some food staples have fueled the feeling that something in our economy is amiss.
Government mandates, regulations, spending, and borrowing are largely to blame for this painful increase in the cost of living. These governmental actions suppressed the supply of goods and services while spurring demand.
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