I’m sure that many METARs remember the stagflation of the late 1970s with a combination of low growth and high inflation. In those days, the current unemployment rate of 4.4% was considered lower than the full employment rate of 5% which was hoped for but not seen between 1974 - 1990. Average inflation didn’t go below 3% between 1966 and 1986.
So I don’t want to push the panic button over today’s economy which would have been considered peachy-keen back then. Even so, the economy is threatened…and the Fed may need to deal with the agony of stagflation if the oil price continues to rise.
Jobs Report, Oil Surge Leave Fed Gritting Its Teeth
Softening labor market and rising energy prices are pulling the central bank in opposite directions
By Nick Timiraos, The Wall Street Journal, Updated March 6, 2026
Jobs Report, Oil Surge Leave Fed Gritting Its Teeth
Softening labor market and rising energy prices are pulling the central bank in opposite directions
By
Updated March 6, 2026 2:31 pm ET
A central bank that watches the job market weaken and inflation risks surge at the same time has few good options.; a Fed office in Washington, D.C. Alex Wong/Getty Images
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The Federal Reserve faces a dilemma between cutting rates to protect jobs and risking higher inflation, which has been above its 2% goal for five years.
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The February jobs report showed a loss of 92,000 jobs and a 4.4% unemployment rate, intensifying the Federal Reserve’s policy dilemma.
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The jobs report coincided with new inflation threats from the U.S.-Israel military campaign in Iran, closing key global shipping lanes.
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- The Federal Reserve faces a dilemma between cutting rates to protect jobs and risking higher inflation, which has been above its 2% goal for five years.
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The Federal Reserve’s biggest fear has always been having to choose between fighting inflation and protecting jobs. Friday’s employment report brought that dilemma a step closer…
Hiring has slowed, and the administration’s fluid tariff program and now the military campaign in Iran have injected the kind of uncertainty that businesses cite when they stop adding workers.
The Middle East conflict has raised the prospect of another bout of price increases in an economy where inflation has been above the Fed’s 2% goal for five years. A jobs report that might otherwise have opened the door to rate cuts was instead wrapped in inflationary risk…
A central bank that finds itself simultaneously watching the job market weaken and inflation risks re-emerge has few good options. The Fed can’t easily cut rates to protect jobs without risking an acceleration in prices that are already too high. It can’t hold firm without risking a labor market that may be more fragile than it looks… [end quote]
The monthly change in jobs began to plunge in early 2025 when the Trump administration began to aggressively deport immigrant labor. With fewer workers the unemployment rate has hardly budged despite lower jobs added.
Wendy