As you may know, the actual Phillips Curve is about the relationship between unemployment and wage inflation. That’s the relationship A.W. Phillips actually identified, and it’s still the correct version. Price inflation doesn’t correlate well with unemployment. Painful disinflation is and always has been about getting wage inflation down.
Forget payroll employment, the big news in today’s job report is the decline in 12-month wage inflation, to a rate slightly below 4% (and only 2.8% over the past three months):
It’s ironic that the thing that may well cost Biden the election (a surge in undocumented immigration) is the very thing that might (and I emphasize might) allow the first recession-free disinflation. The first American soft landing.
PS. The ultimate goal should be around 3.0% to 3.4% wage inflation.
PPS. It looks to me like wages are about 8% above pre-Covid trend and NGDP is about 10% above trend. I suppose the gap is unexpectedly high immigration. So Fed policy has been roughly 8% to 10% too expansionary over the past 5 years.