What is the relationship between inflation and unemployment?

There is evidence that inflation can reduce the rate of unemployment. As unemployment reduces, employers are compelled to increase wages to hire more workers. But, as wages rise, so do prices and people's spending power, leading to more inflation. Therefore, it is commonly believed that inflation and unemployment are inversely correlated. This trend especially holds during recession period, where unemployment rates are increasing and inflation is declining (as seen in the visualization). However, this relationship does not always hold. For example, the 1990s were boom years, where both inflation and unemployment were low. This is because technological adoption increased productivity, global competition kept prices down and demographic changes with more aging "baby boomers" and fewer younger people working. In more recent years, between 2012 and 2015 it can be seen that both inflation and unemployment declined together as a result of policy measures taken to address the Great Recession, which began in 2007.
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