The Phillips curve since 1948: a trade-off that keeps disappearing

Key takeaways

Since 1948 there have been only six years with unemployment under 4 percent and inflation over 4 percent: 1948, 1951, 1968, 1969, and then 2022 and 2023. The corner of the chart that was supposed to be unreachable hosted the last inflation episode.
The trade-off the chart is named for shows up clearly in some eras and vanishes in others. The 1960s slide along a clean curve: unemployment fell from 6.7 percent to 3.5 while inflation rose from 1.1 to 5.4. The 2010s refute it: unemployment fell from 9.6 percent to 3.7 while inflation barely moved.
Where the path sits now: 4.3 percent unemployment and 2.6 percent inflation in 2025, drifting back toward the chart's quiet lower-left after the 2022 spike, without the recession that ended past inflations.

What's happening

Each dot is one year of the US unemployment rate against CPI inflation, connected in time order, 1948 to 2025. Play the chart and the path wanders through distinct eras rather than tracing one curve.

The recent loop is the sharpest since the 1980s. From 2020's pandemic corner (8.1 percent unemployment, 1.3 percent inflation) the path shot to the upper left: 8.0 percent inflation with 3.7 percent unemployment in 2022. It has since fallen back through 4.1 and 3.0 to 2.6 percent in 2025, while unemployment rose only from 3.6 to 4.3.

6 of 78

Years since 1948 with unemployment under 4 percent and inflation over 4 percent: 1948, 1951, 1968, 1969, 2022, and 2023. The combination the trade-off says should not persist has now happened in back-to-back years.

Why the trade-off matters, when it exists

The idea, named for A.W. Phillips's 1958 study of British wages, is that low unemployment bids up wages and prices, so an economy buys less joblessness with more inflation. When the relationship holds, policy is a dial: accept a little more of one to get less of the other. The chart shows when that dial was real. In the 1960s it was: each step down in unemployment came with a step up in inflation, ending at 3.5 percent unemployment and 5.4 percent inflation in 1969.

When the relationship breaks, the dial gives way to worse choices. The 1970s put both numbers above 7 percent at once in 1975, 1980, and 1981, and ending that took 1982's 9.7 percent unemployment, the highest yearly average in the series. The 2010s broke it the pleasant way: a decade of falling unemployment with inflation mostly under 2 percent.

What the path shows

Played in order, the chart is four different economies. The 1948 to 1969 stretch is the textbook curve. The 1970s are the loop out to the upper right, inflation peaking at 13.5 percent in 1980. The long disinflation walks the path back down and left, and from the 1990s through 2019 it flattens along the bottom, ending with 2019's 3.7 percent unemployment and 1.8 percent inflation, a pairing the 1960s chart would have called impossible. Then 2021 through 2023 draws a small, fast copy of the 1970s loop, up and back in three years instead of twelve.

What to watch

The path's next segment turns on whether 2025's drift continues: inflation at 2.6 percent is still above the Federal Reserve's 2 percent target, and the monthly readings ran hotter through the spring of 2026. The other axis matters as much: unemployment has climbed half a point from its 2023 low, and past round trips that stayed friendly, like the mid-1990s, are rarer on this chart than the ones that did not.

Common questions

What is the Phillips curve?

The observed trade-off between unemployment and inflation, named for A.W. Phillips's 1958 study: when unemployment is low, inflation tends to rise, and vice versa. Plotted as one dot per year, the relationship appears as a downward-sloping curve in eras when it holds.

Does the Phillips curve still exist?

It comes and goes in this data. The 1960s traced a clean curve, the 1970s broke it with both numbers high at once, and the 2010s broke it the other way: unemployment fell from 9.6 percent to 3.7 with inflation mostly under 2 percent. The 2022 episode revived the low-unemployment, high-inflation corner.

When were unemployment and inflation both high?

1975, 1980, and 1981 are the only years since 1948 with both above 7 percent. The 1980 peak paired 13.5 percent inflation with 7.2 percent unemployment.

Where are unemployment and inflation now?

In 2025, unemployment averaged 4.3 percent and CPI inflation 2.6 percent. That is the chart's quiet lower-left region, though monthly inflation readings in early 2026 ran above the yearly figure.

Data: US unemployment rate (FRED, monthly, 1948 to June 2026) and Consumer Price Index (FRED series CPIAUCSL, monthly), as published in the Kitegraph library. The chart averages each year and shows inflation as the year-over-year change in the yearly average index, one dot per year from 1948 to 2025, connected in time order. Yearly figures differ slightly from monthly year-over-year readings.