A return to stagflation?

The combination of economic growth during the fourth quarter of 2007 that was much slower than forecast, coupled with rising inflation for energy and food items has some economists bringing up a term not heard in a generation: stagflation (stagnant growth + inflation). From today's New York Times:

The United States economy expanded by a disappointingly weak annual rate of 0.6 percent during the last three months of 2007, the government reported Wednesday, offering the latest indication that the United States is already suffering a substantial slowdown, and perhaps a recession.

The growth from October to December came in at half the rate forecast by most economists, and it was down strikingly from the 4.9 percent clip registered last fall. Over all, the economy expanded by 2.2 percent in inflation-adjusted terms for all of 2007, the slowest rate of growth in five years...

The growth from October to December came in at half the rate forecast by most economists, and it was down strikingly from the 4.9 percent clip registered last fall. Over all, the economy expanded by 2.2 percent in inflation-adjusted terms for all of 2007, the slowest rate of growth in five years...

The focus now is on what lies ahead. Policy makers and investors are looking to a snapshot of the nation’s employment situation scheduled to be released on Friday.

Over the last three years, the pace of job creation has gradually slowed. Earlier this month, the Labor Department reported that the economy added only 18,000 new jobs in December. That report sent markets reeling worldwide and prompted some economists to declare that a recession was a foregone conclusion. It contributed to the Fed’s decision to ease interest rates...

But in recent days, fresh signals have suggested that the job market may not be deteriorating. New claims for unemployment have been dropping since mid-December. On Wednesday, the ADP National Employment Report, which tracks changes at companies with payrolls overseen by ADP, reported that the economy added 130,000 new private sector jobs in January.