High Structural Unemployment Leads to Rising Inflation When Unemployment Falls

Paul Krugman:

What Structural Unemployment Looks Like: One thing I should probably make clear in this discussion of structural unemployment is that I have no problem in principle with the idea that shifts in the economy can temporarily lead to a large rise in the “natural” rate of unemployment. Let me offer a case in point: it was quite clear, circa 1990, that Britain was no longer capable of running unemployment rates as low as those of the 1960s and early 1970s.

But how did we...