Stagflation, an economic situation of slow growth and elevated inflation, has hit the U.S. in the last year due to rising food and energy prices and may take on more permanence for the economy for several reasons.

First is the secular decline in the U.S. labor force due to the aging of the population, lower labor force participation, and tighter immigration.

It is almost comical how much work the Biden administration is putting into denying that the U.S. economy has entered a recession.

Here is what is not in dispute:

The fastest inflation in four decades has Americans feeling dour about the economy, even as their own finances have, so far, held up relatively well.

Just 10 percent of registered voters say the U.S. economy is “good” or “excellent,” according to a New York Times/Siena College poll — a remarkable degree of pessimism at a time when wages are rising and the unemployment rate is near a 50-year low. But the rapidly rising cost of food, gas and other essentials is wiping out pay increases and eroding living standards.

The danger of the U.S. economy returning to a 1970s-style stagflation scenario is the highest it's been in decades, according to former President Barack Obama's top economic adviser.

Jason Furman, a Harvard University professor who previously served as chair of the Council of Economic Advisers, warned that an aggressive Federal Reserve, rising interest rates and persistently high inflation have raised the possibility of a period of stagnant economic growth and high consumer prices.

One of the remarkable things about the global economic order since World War II has been the flexibility of governments in responding to serious crises. From stagflation and the collapse of the Bretton Woods currency regime in the 1970s to the Asian financial crisis of the 1990s to the global financial crisis in this century, the world’s major economies have proven surprisingly adept at finding ways to cooperate to address serious challenges.

The World Bank cut its forecast for global economic expansion in 2022 further, warning that several years of above-average inflation and below-average growth lie ahead with potentially destabilizing consequences for low- and middle-income economies. 

The global economy may be headed for years of weak growth and rising prices, a toxic combination that will test the stability of dozens of countries still struggling to rebound from the pandemic, the World Bank warned Tuesday.

Not since the 1970s — when twin oil shocks sapped growth and lifted prices, giving rise to the malady known as “stagflation” — has the global economy faced such a challenge.

The World Bank on Tuesday slashed its global growth forecast and warned that many countries could fall into recession as the economy slips into a period of stagflation reminiscent of the 1970s.

Global economic expansion is expected to slip to 2.9% this year from 5.7% in 2021 — 1.2 percentage points lower than the 4.1% predicted in January, the Washington-based bank said in its latest Global Economic Prospects report.

The World Bank cut its global growth forecasts for 2022 on Tuesday and warned of the “sharpest slowdown in 80 years.”

In January, the international financial institution forecasted 4.1% economic growth for this year. In light of elevated inflation, lockdowns in China, the Russian invasion of Ukraine, and other phenomena, the World Bank revised its 2022 forecast to 2.9%.