From Wikipedia -
"Stagflation, a portmanteau of the words stagnation and inflation, is a term in macroeconomics used to describe a period of high price inflation combined with slow output growth, high unemployment, or recession. "Stag" refers to a sluggish economy, while "flation" signifies rapidly rising consumer prices.
Stagflation is a problem because most tools for directing the economy, that is fiscal policy and monetary policy can trade off growth for inflation. Either they slow growth to reduce inflationary pressures, or they allow general increases in price to occur while generating output growth. Stagflation creates a policy bind in which efforts to correct one problem can worsen the other. The dilemma in monetary policy is instructive. The bank can make one of two choices, each with negative outcomes. First, the bank can choose to stimulate the economy and create jobs by increasing the money supply (by purchasing government debt), but this risks boosting the pace of inflation. The other choice is to pursue a tight monetary policy (reducting government debt purchases in order to raise interest rates) to reduce inflation, at the risk of higher unemployment and slower output growth."
So it looks like the rebound today has overshadowed some interesting data the last few days -
Unit Labour Costs__1.7%____________6.6%
Productivity down, Labor costs up, factory orders down.
Is this anything to be concerned about or just normal fluctuations? To me it looks a bit of a concern, when in conjunction with other sectors eg housing and sub-prime mortgage meltdown.
And from Bloomberg -