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Unemployment can have a significant impact on inflation. When there is a high level of unemployment, there is typically less demand for goods and services, which can lead to a decrease in prices. Conversely, when unemployment is low, there is typically more demand for goods and services, which can lead to an increase in prices.
This relationship between unemployment and inflation is known as the Phillips curve. According to this theory, as unemployment decreases, inflation increases, and as unemployment increases, inflation decreases. However, it is important to note that this relationship is not always linear and can be affected by a variety of factors, such as changes in productivity or shifts in consumer behavior.
The effects of inflation are often not directly felt but are played out over a long time, especially long-term investments are vulnerable to inflation.
At Horizon65, we created a mobile app that enabled you to check the effect of inflation on your savings.
Download our app and start gaining insight into your current and future finances.
