Some issues in the labor market
Some economists and market watchers have raised the issue that when inflation rate was 4.4% in July 2024 in the Philippines, unemployment rate was 3.1%. However, when inflation rate decelerated to 3.3% in August 2024, unemployment rate was reported to have swelled to 4.7%. This is not exactly inconsistent with the short-run downward-sloping Phillips curve even as the timeline appears too short. At the same time, this short-run negative correlation implies that government may find it unwise to set unemployment targets below the natural rate. For central banks, aside from demand-pull and cost-push supply shocks, inflation could also be triggered by inflationary expectations which could cause the trade-off, or in a few cases, stagflation.
This seems to be happening in the Philippines in June and July. But a factor that could also explain it is structural, or the quality of economic growth. While the 2nd quarter 2024 growth stood at 6.3%, it looks like the job-creating impact of higher economic growth was not sustained in the subsequent month.
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