What determines inflation in the US, job growth or unemployment?

An empirical investigation of postwar US data reveals that movements in inf lation are much more strongly associated with job growth than the unemploym ent rate. Job growth is found to be strongly related to inflation even afte r accounting for the effect of the unemployment rate. The residual influenc e of the unemployment rate on inflation is small, however, after accounting for the effect of job growth. The data shows that in the past inflation ha s tended to decline when job growth is weak even if unemployment is low. Th is suggests that the relatively slow job growth of recent years may partly explain the puzzle that, during much of the current expansion, the US econo my has experienced little inflation in spite of low unemployment. (C) 2001 International Institute of Forecasters. Published by Elsevier Science B.V.