Inflation, jobs, and gold — those are the big stories we’re following.
Inflation continues to remain sticky. With no resolution on the Iran conflict in sight, it appears that above-average oil will remain for the forseeable future. Higher energy costs threaten to derail interest rate cuts, despite the jobs figures, which have come in weaker than expected.
Speaking of jobs: hiring in the US has slowed to a crawl, and we have begun to see people leaving the workforce rather than finding jobs. That results in a lower headline unemployment rate, but that is still bad news. This week’s chart illustrates the point — since February 2026, payroll growth has gone from up six figures a month to now down 20,000, all while the labor-force participation rate steadily declined. Overall, not a good picture.
Gold is another big story. After declining sharply this year, gold has begun to rally back strongly over the past few weeks.
All of this, unfortunately, brings our stagflation thesis back, front-and-center. Without a real resolution to higher energy prices and re-growth in payroll data, our baseline case is stagflation. That said, 1980s-style stagflation seems unlikely. Rather, we are more likely in a muddle-through environment. Lots of volatility, but not likely 1980s inflation and not likely a 2008-style recession.
Chart of the Week
This week’s chart illustrates the challenges facing the jobs market. Monthly payrolls have begun to contract, and the number of people participating in the labor force has declined. There are mitigating factors here, to be fair. With immigration at basically 0, fewer jobs can be created to keep pace with population growth. Even so, job creation is the engine of economic growth. We are unlikely to see growth without it for very long.
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