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July 17, 2026
Partner, Chief Economist
With the Fed estimating the non-accelerating inflation rate of unemployment (NAIRU) at below 4.5%, and unemployment having stayed at or below that level for 57 months, tied for the longest such streak on record, the labor market has been operating in excess-demand territory for an unusually long time. That persistent tightness is a key reason inflation has remained elevated: when unemployment runs below NAIRU, wages and prices face sustained upward pressure.
The chart below puts this streak in historical context. Prior episodes of sub-4.5% unemployment were typically far shorter. The current one is one of the longest on record, which helps explain why the ongoing inflation overshoot since 2021 has been so stubborn.
The bottom line is that a strong economy is the reason why inflation has been high, and only by keeping rates higher for longer can the Fed cool inflation down towards the FOMC’s 2% inflation target.
Sources: US Bureau of Labor Statistics, Apollo Chief Economist
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