Stagflation: 78 Years of US Inflation, Unemployment and Recessions, Checked

Michael Whitman · Trading since 2017, full-time since 2020 · Published 2026-09-27

Stagflation joins two words that usually pull in opposite directions: stagnation, a weak economy with rising unemployment, and inflation, prices rising fast. Normally a weak economy cools inflation, so seeing both at once is unusual, and it leaves policymakers with no easy move.

This page explains why it happens and why it is hard to fix, then counts it in 78 years of US data under a measuring rule this site sets out in full, and checks what the stock market did in those months.

How it works

The usual pattern is a trade-off. When the economy runs hot, businesses hire, wages rise and prices follow. When it slows, unemployment rises and price increases usually ease. A recession has normally brought inflation down.

Stagflation breaks that pattern. The best-known cause is a supply shock: something makes a basic input, such as energy, suddenly more expensive. Prices rise across the economy because costs rose, not because demand is strong, and at the same time the higher costs squeeze spending and output. The Federal Reserve’s own history of the period, The Great Inflation, names two such shocks: an Arab oil embargo from October 1973, during which crude oil prices quadrupled, and a second energy crisis after the Iranian revolution in 1979 that tripled the cost of oil. The same essay calls the years when inflation and unemployment were both high the era of “stagflation.”

Expectations can keep it going. The Fed history describes households coming to anticipate rising prices. Once workers and businesses expect high inflation, they build it into wage demands and prices, so inflation can stay high even as the economy weakens.

Why it is hard to fix. A central bank fights inflation by raising interest rates, which slows borrowing, spending and hiring. In a normal inflation that is the cure. In stagflation the economy is already weak, so higher rates deepen the slowdown. Cutting rates to support jobs risks feeding inflation instead.

There is no official definition. Unlike a recession, which the National Bureau of Economic Research dates, nobody publishes stagflation dates. Any count depends on the thresholds chosen, so this site uses its own measuring rule, set out in full below, and a wider second rule to show how much the answer moves.

A worked example

Test one month under the site’s main rule: the US is in a recession month in FRED’s NBER-based flag, and the consumer price index (CPI) is at least 5% above the same month a year earlier.

December 1974:

1. CPI: 51.900 in December 1974 and 46.300 in December 1973.
2. Inflation: 51.900 / 46.300 - 1 = 12.1%.
3. Recession flag: yes, December 1974 is inside the recession that ran from December 1973 to March 1975.
4. Unemployment rate: 7.2%, from the Bureau of Labor Statistics.
5. Result: a stagflation month on both rules used on this page.

June 2022, for contrast:

1. CPI: 294.957 in June 2022 and 270.654 in June 2021, so inflation was 294.957 / 270.654 - 1 = 9.0%.
2. Recession flag: no.
3. Unemployment rate: 3.6%.
4. Result: not a stagflation month on either rule. Prices were rising fast, but unemployment was low and the month was not in a recession by the official dates.

A common shortcut adds the two numbers. The misery index is the inflation rate plus the unemployment rate. It was 19.3 in December 1974 and 12.6 in June 2022. Its highest reading since 1948 was 21.9 in May 1980: inflation of 14.4% and unemployment of 7.5%.

The original data

Every month from January 1948 to August 2026, 943 in all: the 12-month change in the consumer price index from FRED, the unemployment rate from the Bureau of Labor Statistics, and FRED’s NBER-based recession flag. October 2025 is missing because neither CPI nor the unemployment rate was published for that month during the 2025 lapse in federal funding.

This site’s measuring rule. Rule 1, the main rule: a month counts as stagflation when FRED’s USREC series equals 1 and the 12-month change in FRED’s CPIAUCSL (the consumer price index for all urban consumers, all items, seasonally adjusted) is 5.0% or more, worked from the index levels without rounding. Rule 2, the wider check: the same CPI test plus an unemployment rate of 6.0% or more, from the Bureau of Labor Statistics series LNS14000000, which FRED republishes as UNRATE. The 5% and 6% lines are this site’s choices, not an official standard.

Rule 1, recession plus inflation of 5% or more: 56 months. They fall in 6 of the 12 recessions since 1948:

The other six recessions, in 1948 to 1949, 1953 to 1954, 1957 to 1958, 1960 to 1961, 2001 and 2020, never reached 5% inflation. The 2020 recession had the highest unemployment of any, 14.8%, with inflation at 1.5% or lower.

Rule 2, inflation of 5% or more with unemployment of 6% or more: 90 months, 31 of them also counted by rule 1. Most sit in two long runs: 44 months from October 1974 to May 1978 and 33 months from December 1979 to August 1982, 77 of the 90 between them. The rule catches the years after the 1973 to 1975 recession, when unemployment stayed at 6% or more and inflation at 5% or more for more than three years.

Since 1992 the count is almost empty. Rule 1 found only July and August 2008, when inflation touched 5.5%, and rule 2 only August 2008. September 2008, at 4.95%, just misses the line. Every month is in the monthly table.

What stocks did

The S&P 500 is measured here after inflation: each month-end close divided by that month’s CPI. This is the price index only; dividends are not included. The daily index series used here starts in January 1950, so the monthly changes run from February 1950.

In the 56 rule-1 months, the median monthly change after inflation was -1.55%, and 24 of the 56 months rose. In the 57 recession months without 5% inflation the median was +0.76%, and in the 804 months outside recessions +0.78%. These are small samples of clustered months, most of them from one decade, so the gap describes that history rather than a rule.

The long view is starker. After inflation, the S&P 500’s month-end high of November 1968 was not matched until December 1992. From November 1968 to July 1982 the index itself ended almost unchanged, 108.37 to 107.09, a fall of 1.2%, while consumer prices rose 175.4%. After inflation that is a fall of 64.1%.

The 1973 to 1975 recession shows the same gap in one episode. From the end of October 1973 to the end of March 1975 the index fell 23.0%, and after inflation 33.5%.

When it fails

The word fails when it is used for any bad mix of numbers. In 2022 the label was widely discussed, yet on both of this page’s rules not one month qualified, because unemployment stayed between 3.5% and 4.0% all year and no month was in recession. High inflation alone is not stagflation.

The thresholds decide the answer. Moving from rule 1 to rule 2 changes the count from 56 months to 90 and shifts much of it from recessions into the slow years after them. Any statistic about stagflation, including the ones here, is only as meaningful as its definition.

The recession dates arrive late. The NBER dates recessions after the fact, so a rule that relies on them can only be applied with hindsight. The GDP page shows how even the output figures are revised after the fact.

It fails as a market call. The weak real returns above come mostly from one long episode, and most of the 56 months are in the 1970s and early 1980s. Knowing that inflation is high tells you nothing reliable about the next month in stocks, and none of these figures predicts one.

Related

Inflation and the consumer price index cover the price half of stagflation, and recession and GDP cover the output half.

Interest rates are the tool that makes stagflation hard to fix, and nonfarm payrolls is the monthly jobs report that shows the labor market side as it happens. A bear market is what the long 1970s decline looked like in the index itself.

This page is educational, not financial advice. Test every idea on your own charts before risking money.