Abstract
In an era of shifting economic landscapes and fluctuating market prices, this research
investigates how changes in the cost of living dictate the purchasing habits of Filipino households and
evaluates the labor market's role as a vital link in this dynamic. This study investigates the influence of
inflation on Philippine household spending and evaluates the intervening role of the unemployment rate as a
potential transmission channel between 2000 and 2018. Adopting a quantitative causal-comparative design,
the research utilized the Baron and Kenny mediation framework, supported by linear and multiple regression
analyses, along with logarithmic transformations to estimate elasticities and stabilize variance. To ensure the
reliability of the time-series analysis, the Durbin-Watson test was utilized. Model validity was ensured
through Jarque-Bera (normality), Breusch-Pagan (homoscedasticity), and the Ramsey RESET test (model
specification). The empirical results indicated that after accounting for serial correlation and variable
transformations, inflation did not have a statistically significant direct impact on household consumption (p =
0.513). While the mediation analysis and Sobel Test failed to establish a significant transmission link (p =
0.45), multiple regression analysis revealed that the unemployment rate functions as a highly significant
independent predictor of household spending (p < 0.001). These findings imply that the traditional
inflation-consumption nexus in the Philippines is secondary to labor market stability, with factors such as
remittance inflows and consumer credit allowing spending to persist despite price volatility. Consequently, it
is recommended that the Philippine government move beyond isolated price stability measures and instead
implement integrated macroeconomic policies that prioritize labor market protections and high-quality
employment to effectively safeguard the welfare of Filipino consumers.
