The stock market is down today on a a relatively strong jobs report, because New Keynesian economics and the Phillips Curve say unemployment must rise to lower inflation.
The Bank of International Settlements in its 2022 Annual Report questioned the reliability of the Phillips Curve in the current economic environment of post Pandemic supply chain disruption aggravated by the Ukraine -Russia War with its food and natural gas/oil supply disruptions.
The wage and price-setting mechanisms and interactions at the very heat of the inflation process are glossed over in the Phillips Curve process hiding the play between worker's bargaining power and capital and resulting in a flattening of the Phillip's Curve. Studies have shown that in an open economy with a fiat currency, it is possible to have a dramatic increase in employment and a flat Phillips Curve whereas in a flexible exchange economy a trade-off between inflation and unemployment is unavoidable.
The American Rescue Plan provided a necessary stimulus to the post pandemic lock down and
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