Curtis Dubay Curtis Dubay
Chief Economist, U.S Chamber of Commerce


May 28, 2024


Inflation is persisting and economic growth feels slow, leading to worries about stagflation. But those concerns are misplaced. Here’s why.

Of the three conditions that contribute to stagflation – high inflation, slow economic growth and rising unemployment – only inflation is an issue.

And while inflation is still well above the Federal Reserve’s 2% target, it is down considerably from its peak of 9% in the summer of 2022.

The Fed estimates inflation will be at its 2% target by 2026, and while that is taking longer to happen than many hoped we’re headed in the right direction.

Couple that with the growing economy and low unemployment, and stagflation – which, by definition, occurs in a slowing economy with rising joblessness and high inflation – and you realize stagflation is not a looming threat.

Economic growth remains robust

The economy grew around 3% in 2023. While 2024 started off slower, growing at 1.6%, the most important factors of growth – consumer spending and business investment – grew closer to 3%. 

  • The Atlanta Fed’s real-time GDP tracker currently has the economy growing at a strong 3.6% in the second quarter, well above the generally accepted 2% growth rate over the long term. Clearly, growth remains robust.

To meet the criteria for stagflation, the economy would have to grow considerably slower, below 1%, for instance. But the economy does not usually shift into much slower growth without something materially changing – a bubble of some kind bursting – or an outside event. While such events are possible, they are difficult to predict.  It is important to remember that the economy won’t stagnate on its own.

Similarly, it is possible that unemployment could rise while inflation is elevated, but that does not appear likely. The economy is still short of workers. All businesses need more employees, and hiring remains strong for those looking for work.

Wage growth, productivity, investments are strong

The worker shortage is driven by our demographics. We have an aging society, and our demographic makeup isn’t going to change any time soon, meaning we will continue to be short of workers.

Unemployment rising to painful levels while businesses are desperate for workers is not a recipe for increased unemployment.  

Furthermore,other important economic data points like wage growth, productivity, and business investment are strong.

The need for businesses to invest in new technologies like automation and AI to make up for a lack of workers is likely to create a situation where investment remains strong, businesses continue hiring, and new technologies make those workers more productive. This would allow businesses to continue paying higher wages, which would not happen during stagflation.

Bottom line: The tendency to worry about the possibility of painful economic times right around the corner is natural. But to worry about stagflation in the current environment is misplaced. It is possible that growth will slow and unemployment will rise between now and 2026, but to rise to the level of stagnation, growth would have to slow a great deal, and unemployment would have to take off. Neither seems likely. Inflation may persist longer than we hoped, but the economy and jobs market are withstanding it well and should continue to.

About the authors

Curtis Dubay

Curtis Dubay

Curtis Dubay is Chief Economist, Economic Policy Division at the U.S. Chamber of Commerce. He heads the Chamber’s research on the U.S. and global economies.

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