A chart from Jared Bernstein


For those keeping score at home, the idea would be that declining inflation causes unemployment by pushing up real wages. Labor become more costly during a recession because employees expect raises and balk at wage cuts.

Yet, when prices are falling this means that labor actually costs companies more and they cut back.

In any case I am skeptical about this. Not to offend Bernstein but I have to ask whether his wage data accounts for composition effects. More lower income folks got the axe, which would artificially boost the average wage.