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How Do Periods of Inflation, Recession Affect Real Earnings?

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Abstract

Households can lose spending power if they suffer job losses during recessions or when the cost of living rises at times of high inflation. One way to assess the historical roles these two factors have played in eroding economy-wide earnings is by breaking down the cumulative growth in inflation-adjusted household earnings into three components: nominal earnings growth, inflation, and employment growth. Analyzing the results suggests that periods of high inflation may undermine economy-wide real earnings growth more than mild recessions.

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  • Leila Bengali & Evgeniya A. Duzhak, 2024. "How Do Periods of Inflation, Recession Affect Real Earnings?," Economic Review, Federal Reserve Bank of San Francisco, vol. 2024(09), pages 1-6, April.
    • Handle: RePEc:fip:fedfer:98026
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    1. Christopher Huckfeldt, 2022. "Understanding the Scarring Effect of Recessions," American Economic Review, American Economic Association, vol. 112(4), pages 1273-1310, April.
    2. Johannes F. Schmieder & Till von Wachter & Jörg Heining, 2023. "The Costs of Job Displacement over the Business Cycle and Its Sources: Evidence from Germany," American Economic Review, American Economic Association, vol. 113(5), pages 1208-1254, May.
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