But there is more to economic data than just jobs numbers, and more to economic growth than just employment. There is consumption. There are measures of industrial production without regard to employment. There are measures of industrial capacity utilization.

It is intuitively obvious that rising retail sales—rising consumption—is a sign the economy is expanding.

It is equally intuitively obvious that rising industrial production is a positive sign. To borrow from the late H. Ross Perot, we need to be making more “things”.

For the same reason, we are doing better the more of the nation’s industrial capacity is being put to work.

With the political primaries largely over and done, and the several states heading into the general election in November, it is worthwhile to look beyond jobs and prices, to gauge how the broader health of the US economy, which is sure to be part of the political debate as the fall election season heats up.

With the US also moving from war to a problematic peace with Iran, the next few months could easily prove to be a pivotal time for the US economy. Assessing the state of the US economy now might be helpful in assessing how well the US moves forward now that the war with Iran is arguably over.

It is particularly worthwhile at the moment, because the data shows the economy is doing fairly well. The data leans into the job growth narrative from the May Employment Situation Summary and tells us that the job growth in May was more real than not.

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PMI Data Shows Growth Trend

The most positive notes come from the independent Purchasing Managers Index1, or PMI, surveys.

The May Manufacturing PMI from S&P Global is the third consecutive month of increasing expansion.

Not only does the PMI data show manufacturing concerns in this country to be expanding, the amount of that expansion is increasing.

An important caveat: we must be cautious with the PMI data. At the end of the analysis the PMI data is an industry survey, and therefore all the possibilities for error we see within BLS data on jobs can happen with the PMI data. Always take PMI stats with a grain of salt.

However, the Institute for Supply Management maintains its own PMI data and conducts its own surveys. When the ISM PMI data shows the same trend as S&P Global, that is a confirmation we should not be quick to overlook.

What both manufacturing PMI data sets show is that, beginning in January, US economic activity has been expanding.

The S&P Global services PMI data for May showed expansion, but also indicated the growth was potentially fragile and not at all assured.

The ISM Services PMI data for May shows a stronger expansion, one that goes back potentially back to before the start of Donald Trump’s second term in the Oval Office.

The S&P Global and ISM surveys are conducted independent of each other. While as surveys we need to be cautious about how much significance to place on them, that both survey sets show expansion for both manufacturing and service industries makes the data difficult to dismiss.

The PMI data across the board shows the US economy is expanding right now.

Retail Sales Are Increasing

The U.S. Census Bureau gives another positive growth signal with its measurements of retail sales.

As of May, 2026, the Advanced Retail Sales estimate shows year on year sales growth of 7.5%.

Month on Month, Advanced Retail Sales grew by 1% in May.

More importantly, retail sales—which are measured in nominal dollars—are growing faster than the Consumer Price Index. Sales growth is greater than inflation, which means there is real growth in consumption.

Consumption—by far the largest component of the US economy—is demonstrably robust, and has been almost since the start of President Trump’s second term.

Industrial Production Is Increasing

America’s performance in manufacturing is an especially important consideration. Not only do manufacturing jobs generally command higher wages than most service jobs, but a major campaign promise made by President Trump in 2024 was to turn the United States into a “manufacturing superpower”.

Overall, industrial production has been strengthening in this country since Donald Trump took office at the start of 2025.

Even sectors that started out well under Joe Biden have been picking up under President Trump.

Additionally, US capacity utilization has been increasing steadily under Donald Trump, which is a clear reversal from the long decline under Joe Biden.

These growth metrics, assessed independently of manufacturing jobs, resonate well with the manufacturing sector’s recent return to job growth.

When we see independent data sets supporting the same broad narrative, we necessarily have greater confidence in that narrative. With industrial production growth, capacity utilization growth, and finally manufacturing job growth, a narrative that the manufacturing sectors of the US economy are growing is difficult to refute.

America is making more things, and America is putting more people to work making more things. These are exactly the sort of economic outcomes we need to see if Donald Trump’s pledge to make the US a “manufacturing superpower” is to be realized.

At the moment, the data says Donald Trump’s pledge is being realized.

Staving off Stagflation?

The economic growth outlook has taken on added importance because of the war with Iran, and Iran’s subsequent illegal closure of the Strait of Hormuz, slapping an oil price and supply shock on the world’s economies by effectively bottling up 20% of total global oil supply.

When the war had largely turned into an attritional stalemate over the Strait, with Iran blocking oil shipments from its Arab neighbors and the US blockading Iranian shipping in return, the prevailing assessments indicated that the situation was sending the worlds’ economies into a stagflation crisis, as the sudden loss of global oil supply was setting the stage for global demand destruction.

We do well to remember that signature aspect of supply shocks and the stagflation they can produce. When physical supply is abruptly diminished, physical demand must also be diminished to restore overall economic equilibrium. If the physical supply of widgets goes from 100 down to 80, the physical demand for widgets must also go down to 80, for the simple reason that 80 widgets are all that is available. There cannot be any demand for goods (or quantities) which do not exist.

When an economy is already in the doldrums, such as when job growth is weak or when overall economic growth is weak, a supply shock is particularly thorny, as the demand destruction will push a moribund economy into outright recession.

When Operation Epic Fury began, then-Fed Chair Jay Powell was dismissive of stagflation concerns, when the data clearly showed there was significant risk of stagflation emerging from the Strait of Hormuz closure.

No, we are not seeing stagflation at present, except in the most incremental and technical fashion. The oppositional forces are present and discernible, but they are not (yet) at a 1970s level of severity.

We are, however, seeing several indicators that a stagflation scenario is a real risk to the economy. A significant inflation shock coupled with the soft labor markets the United States has endured for the past few years could very easily translate into a stagflation scenario.

What has changed since then for the US economy has been the transition from jobs recession to jobs recovery. With multiple consecutive months of robust job growth as of the most recent Employment Situation Summary report, the US economy is in a stronger position now than it was just a few months ago.

A broader sweep of economic data indicates that economic strength has some depth to it. The stronger and more robust the US economy is, the better it will be able to withstand the pricing pressures which will linger for a time from the oil shock.

We are already seeing some indication of the benefits of a stronger economy. While the Federal Reserve saw fit to stand pat on the federal funds rate, the European Central Bank is raising interest rates to combat a worsening stagflation crisis on the continent.

Will the US avoid a stagflation scenario altogether? That is highly unlikely. The energy price shock itself has already made itself known. The real misery index—the combination of real unemployment and year on year consumer price inflation—is rising. To a degree, the stagflation scenario has already begun for the United States.

If the US continues to show strong increases in industrial production, capacity utilization, and manufacturing job growth, we may see the misery index rise less sharply than would otherwise have been the case. We may see less overall demand destruction and greater tolerance for consumer price inflation at least in the short term.

If the peace deal is proven to be substantive and real, and brings meaningful change to the Persian Gulf states, a strong US economy would potentially position the US well to reap tangible benefits from that change. It is far too soon to know if the US will “win the peace” with Iran, but a stronger US economy is surely a better position from which that can happen.

Between the upcoming mid-term elections and the unfolding peace with Iran, right now is an important economic moment for the United States. Fortunately, at this moment, a substantial number of economic signals are showing the US economy is growing.

That’s a nice piece of good news.

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The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve’s dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system.

This was exactly what Wall Street had priced in weeks ago. On the rate announcement, Wall Street was not disappointed.

Then newly-minted Federal Reserve Chairman Kevin Warsh opened up his mouth, and it was that moment when the markets started heading south, dropping nearly 600 points over the course of the post-FOMC presser, a performance that surely had former Fed Chairman Jay “Too Little, Too Late” Powell downright jealous.

What did Kevin Warsh say that spooked the markets? Change. Kevin Warsh spoke of how he means to change how the Federal Reserve and the FOMC conduct monetary policy. The Kevin Warsh Federal Reserve will not be a continuation of the Jay Powell Federal Reserve.

That was enough to spook the markets and trigger a selloff in equities, while Treasury yields spiked.

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Whisky Tango Foxtrot

Wall Street has for weeks presumed that the FOMC would stand pat on the federal funds rate, with CME Group’s FedWatch pricing tool putting the probability of no change very near 100%.

It is not hard to see the logic in this. With consumer price inflation heating up, and with producer prices signalling a few more months at least of higher inflation, traditional Fed thinking would lean towards either no change in the federal funds rate, or possibly a rate hike.

Blame Iran for closing the Strait of Hormuz. Blame President Trump for launching a war with Iran over their nuclear weapons program. Regardless of how one frames the oil price and supply shock emanating from the disruption of Persian Gulf oil flows, the reality remains the same: elevated energy price inflation, greater energy price volatility, and a finite capacity of leading industrial nations to buffer the shock with releases from strategic petroleum reserves.

All this has been known for some time, as has the Fed’s traditional policy playbook for such a scenario.

Yet the Fed caught Wall Street off guard even with the policy press release ahead of the post-FOMC press conference, as the first market hiccup of the day showed.

Wall Street’s comfort level with Kevin Warsh did not get any better during the press briefing itself, and by the end of the briefing the Dow had shed close to 600 points, with the S&P 500 and NASDAQ following close behind.

Treasury yields confirmed Wall Street’s shock and dismay, with the 10-Year Treasury jumping almost 10bps between the FOMC press release and the conclusion of the press briefing.

Even while meeting expectations on rates, the Kevin Warsh Federal Reserve succeeded in giving Wall Street a minor “Whisky Tango Foxtrot” moment.

What was the change that spooked Wall Street? While the rate decision was as expected, the tone of the announcement, as well as Warsh’s demeanor during the press conference, were noticeably different: more focused, more disciplined, and perhaps even more confident than had been the norm during Powell’s tenure as Fed Chair.

Less Fed Guidance, More Market Involvement

Warsh lost no time in signalling the start of a new era in Fed policy communications. The FOMC statement announcing the federal funds rate would remain unchanged was barely half a page.

FOMC statement June 17 2026

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April’s statement announcing the same policy decision was over a page in length.

FOMC statement April 29 2026

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Gone was the padding of reassurances that the FOMC really does mean to follow the data and get consumer price inflation down to 2% year on year. Gone was the fluff about what the data presumably showed.

What remained was a simple statement of the policy decision and a few perfunctory sentences on inflation and job growth.

When Warsh began the press briefing a short time later, he wasted no time before announcing significant changes in how the Federal Reserve and the FOMC intended to communicate monetary policy, beginning with how the FOMC rate announcement was likely to be different going forward.

My Fed colleagues and I will be working in close collaboration to ask what changes might improve the conduct of monetary policy.

On that score, you might have already noticed something, a difference in today’s policy statement. It’s a bit shorter, a bit simpler, and it dispenses with some older language. That statement just gives you the facts as best we can judge it. Absent also is so-called forward guidance which we agreed was not well suited to the current policy conjuncture.

This afternoon you also received the usual summary of economic projections. It’s been the practice of this committee for participants to submit these projections and I have encouraged my colleagues to continue to do so. I, however, have refrained from offering any projections of my own, consistent with my long-held views on the SEP, at least as currently structured.

Without missing a beat, Warsh went on to announce a set of task forces to overhaul Federal Reserve communications practices and data management.

I’m appointing a task force in each of five areas that are central to the broad conduct of monetary policy: First, Fed Communications; Second, the Fed’s balance sheet; Third, our use and reliance on existing data sources; Fourth, productivity and jobs in an era of transformation; And last, the Fed’s inflation frameworks.

These subjects are timely, consequential, and in my view worthy of a fresh look. My colleagues and I discussed them with energy and purpose over the last couple of days.

For each of these independent task forces, I’m enlisting some of the very best minds, both inside and outside the economics profession. They will be supported by subject matter specialists from our superb Fed staff.

And they’ll have a straightforward charge: Start with first principles. Ask hard questions. Examine current practice. Consider alternatives. and ultimately propose next steps for policymaker consideration.

With short, succinct sentences in a crisp staccato delivery, Kevin Warsh made it clear that the Fed was going to be handling its brief differently going forward.

Perhaps the most notable point Warsh made during the press briefing was in his rationale for doing away with the previous Fed practice of giving “forward guidance”—a sense of where the Fed anticipated monetary policy going next. Fundamentally, Warsh wants to see the markets playing a greater role in driving interest rates than Federal Reserve policy.

Edward Lawrence with Fox Business. So if you don’t give a lot of ongoing forward guidance, won’t the markets have more volatility and shouldn’t Americans have more access into what you’re thinking going forward?

Kevin Warsh: So I think financial markets perform best when they react to incoming data. I think the financial markets work less efficiently when they ask a question, how will the Federal Reserve react to that incoming information? The more that markets are paying attention to what’s happening in the real economy, deciding what’s good data and what’s less good data, the more financial markets can price what they believe is the most likely and what are the tail risks. Financial market prices are probably the most important source of information to guide central bankers.

But when all the financial markets are doing is reflecting back what we’ve said then we’re taking the most important source of information and we’re being blind to it. I’d like us to create a system where those blinders come off where markets are following data that they efficiently think is reliable and they’ll come with better information through market prices to us we can make more informed decisions with ultimately the goal that I set at the outset, deliver on the price stability objective that Congress told us to do and that we better get in the business of doing.

Without directly criticizing his predecessor, Warsh made it clear that the policy of the Federal Reserve telling Wall Street where interest rates were going to go had the unhelpful consequence of turning Wall Street into little more than a policy echo chamber, where Wall Street was merely sending back at the Fed the outcomes the Fed said were desired through its forward guidance on interest rates.

Warsh wants Wall Street to do its own research, look at its own data, and drive its own conclusions on interest rates. In the short term this may mean greater volatility for both Treasuries and equities, but the end result will be Wall Street giving the Federal Reserve higher quality information on which to base future interest rate decisions.

Warsh quite plainly means to turn Wall Street from a consumer of economic data into a source for the Fed of economic data.

A New Day Has Dawned

Whether Kevin Warsh will turn out to be a good Federal Reserve Chairman or a poor one is a question we will see answered only gradually over the course of the next several months. One part of that answer has already been given, however, and that is how he intends to change the status quo at the Fed.

Warsh undoubtedly appeased the more hawkish Fed watchers by not pushing to lower the federal funds rate, even though President Trump has been consistently vocal about the need for exactly that. He will no doubt go up in the estimation of some if, some time during the summer, the FOMC elects to raise the federal funds rate by 25bps-50bps.

Warsh clearly unnerved much of Wall Street with his remarks. Without regard to how much independence Warsh intends to have from President Trump, he made it clear he will also be independent from Congress and Wall Street. He will steer monetary policy where he thinks it should go, and that may not be where Trump, Congress, or Wall Street think it should go.

A new day has dawned at the Federal Reserve, or so Kevin Warsh wants people to believe. If Warsh accomplishes his vision the Fed will provide less data but hopefully more information using higher quality data.

Whether that ends well for the Federal Reserve’s dual mandate of price stability and full employment is another question we will see answered only gradually over the course of the next several months.

This much is certain: the Federal Reserve will not be as it was.

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As highlighted when the “deal” was announced on Sunday, evaluating the terms of the deal requires the specific text of those terms. We have now been given that text, and we can judge for ourselves if this is a good deal or a bad one.

I will present my initial thoughts after the text itself, but I invite everyone to read the terms and decide for themselves. The deal is not made “good” merely because I or any other analyst says it is. The deal is not made “bad” merely because I say it is.

The deal is the deal. Good or bad, this is the Memorandum of Understanding to be signed on Friday.

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The Fourteen Points

These are the fourteen points of the Memorandum of Understanding to be signed on Friday, as released to CNN, Bloomberg, and other media outlets.

1 — The Islamic Republic of Iran and the United States, together with their allies in the current war, declare upon the signing of this Memorandum of Understanding an immediate and permanent end to the war on all fronts, including Lebanon, and undertake that from now on they will not launch any hostile action against each other, and will refrain from the threat or use of force against each other. The final agreement will confirm the provisions of this Article and the remaining Articles.

2 — The Islamic Republic of Iran and the United States undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs.

3 — The Islamic Republic of Iran and the United States undertake to negotiate and reach a final agreement within a maximum period of 60 days, extendable by mutual consent.

4 — Immediately upon the signing of this Memorandum of Understanding, the United States lift the naval blockade and prevent any interference or obstruction against the Islamic Republic of Iran, and restore traffic within a maximum of 30 days to its full capacity; the traffic of ships shall be proportional to the pre-war volume of traffic on the part of the Islamic Republic of Iran. The United States also undertakes to withdraw its forces from the surrounding areas within 30 days after the final agreement.

5 — Upon signing this Memorandum of Understanding, the Islamic Republic of Iran will immediately take steps to ensure that the movement of merchant ships from the Persian Gulf to the Sea of Oman and vice versa is resumed within 30 days to the pre-war volume, taking into account the need for the removal of technical obstacles and the neutralization of mines by Iran.

6 — The United States undertakes, together with its regional partners, to create a comprehensive plan agreed upon by both parties for the rehabilitation and economic development of the Islamic Republic of Iran, while ensuring financing of at least $300 billion. The implementation mechanism of this plan, as part of the final agreement, will be formulated within 60 days.

7 — The United States commits to ending, on a schedule to be agreed upon as part of the final agreement, all types of sanctions currently facing the Islamic Republic of Iran, including resolutions of the United Nations Security Council and the Board of Governors of the International Atomic Energy Agency (IAEA), and all unilateral U.S. sanctions, both primary and secondary.

8 — The Islamic Republic of Iran reiterates that it will never produce nuclear weapons. The Islamic Republic of Iran and the United States have agreed that the fate of enriched material and the fate of all other mutually agreed nuclear-related issues, including Iran’s nuclear needs, will be adequately addressed in a final agreement; the final agreement will confirm the provisions of this Article.

9 — The Islamic Republic of Iran and the United States agree that, pending a final agreement, they will maintain the status quo: Iran will maintain the status quo on its nuclear program, and the United States will not impose new sanctions on Iran or strengthen its forces in the region.

10 — The United States undertakes that immediately after the signing of this Memorandum of Understanding, and until the date of the lifting of sanctions, the United States Treasury Department will issue waivers for exports of Iranian crude oil, petrochemical products and their derivatives, and all related services, including banking, insurance, transportation, and the like.

11 — The United States undertakes that, in light of the progress of negotiations towards a final agreement, frozen or restricted funds and assets of the Islamic Republic of Iran will be released and made fully available. These funds, whether held in the master account or transferred, will be used for any final beneficiary payment determined by the Central Bank of the Islamic Republic of Iran and will be fully available for use. The United States undertakes to issue all necessary permits and licenses on this basis.

12 — The Islamic Republic of Iran and the United States agree that an implementation mechanism will be established to oversee the successful implementation of and future commitment to the Final Agreement.

13 — Following the signing of this Memorandum of Understanding, and upon receipt of assurances regarding the commencement of implementation of Articles 4, 5, 10, and 11 of this Memorandum of Understanding, and the continued implementation of these steps, the Islamic Republic of Iran and the United States will enter into negotiations for a Final Agreement solely with respect to the remaining Articles.

14 — The final agreement will be approved through a binding resolution of the UN Security Council.

These are the terms of the MeMemorandum Of Understanding due to be signed this coming Friday.

What Do The Terms Mean?

What to make of the MOU?

The critics of the concept of the MOU who have claimed this is not a deal, but a deal to negotiate a deal, are correct. Nothing in the language of this Memorandum finalizes what is to become of Iran’s nuclear weapons program. Iran pledges that it won't develop nuclear weapons, but if such pledges were meaningful, Operation Epic Fury and even last year's Twelve Day War would never have happened.

The Memorandum does fully reopen the Strait of Hormuz and allows unrestricted maritime traffic. Points Four and Five call for reciprocal withdrawal of Iran's mines and other barriers within the Strait and the US naval blockade of Iranian shipping. This is the only substantive point of agreement within this Memorandum text.

What the Memorandum does not address even tangentially: Israel's war against Hezbollah. Nothing in this text obligates Israel to stand down or pause any ongoing operations. Given the diplomatic outcry about that war raised by Iran with respect to the ceasefire agreement, that is a striking omission.

Does the Memorandum call for immediate release of any frozen Iranian assets? Not really, although we should not be surprised to see Iran press the argument that Point Eleven does. However, the language “in light of the progress of negotiations towards a final agreement” is sufficiently vague that we can expect JD Vance be confidently dismissive of such claims, and President Trump to say that the Memorandum does not call for that at all. War hawks and Democrats will go with Iran's interpretation, as it best furthers their individual political agendas.

Point Seven does not lift any sanctions against Iran. It does establish that the ending of sanctions will be part of the final deal to be negotiated over the next 60 days. Point Ten calls for waivers on sanctions restricting oil shipments to be issued for the next 60 days. If no deal is reached, the expiration of the 60 days and thus the waivers indicates a “snap-back” mechanism is fundamentally in place.

War hawks will almost certainly argue that even a sixty day window in which Iran can export oil without sanction penalties being triggered is too much generosity. Some media analysis suggests Iran could generate as much as $100 billion in oil revenue over that 60-day time frame.

The Memorandum confirms there will be a reconstruction fund. However, Point Six does not call for United States tax dollars to be involved nor does it call for Iran to receive a blank check.

Point Six is clearly the most controversial point in the Memorandum. This is definitely an innovation from previous agreements such as Barack Obama's lamentable Join Comprehensive Plan Of Action.

Yet it might also be the point with the most promise. An investment fund could be a means for reintegrating Iran into the global maritime trading order, and that is probably the most enduring deterrent for keeping Iran from funding terrorism and trying to develop nuclear weapons; being invested in a social infrastructure is a powerful disincentive against damaging that infrastructure.

That is what the fund could be. It could alternatively be a $300 billion boondoggle that funnels more cash to the IRGC than the JCPOA.

The best that can be said of the fund proposal is that it is a high risk, high reward concept for both sides. It is outside the box thinking, and that alone makes it worth considering, given the obvious failures of conventional thinking on Iran.

While the Memorandum does not specify downblending of Iran's enriched uranium stockpile, Point Eight makes it clear that the disposition of the stockpile is very much on the table. Given Reuters having reported earlier that Iran understood downblending would happen, I have my doubts how effective Iranian counterarguments to downblending would be, especially if the Khamenei regime desires to see its funds unfrozen.

Point Nine presumably freezes all activity on both sides surrounding Iran’s nuclear weapons program. That means Iran has to halt any work on the facility under Pickaxe Mountain.

Points Twelve through Fourteen are predictable diplomatic boilerplate that any agreement reached will be self-enforcing, with adequate implementation mechanisms, and that the United Nations will put its imprimatur on the final deal.

Is the Memorandum of Understanding a good agreement? It is an agreement to reopen the Strait of Hormuz, and that is all. Everything else is a point to be negotiated later.

Is that enough of an agreement? Readers will have to reach their own conclusions.

Will The Deal Hold?

Will the Memorandum produce a lasting peace? That seems problematic. There is enough imprecision in the points to ensure considerable argument about what is in the Memorandum.

Can Iran be trusted to negotiate in good faith? Not even a little bit. Iranian duplicity rivals Vladimir Putin's, and that is no easy hurdle to clear. If Iran were an honest negotiating partner we would not be at this juncture now. That alone makes this Memorandum an unlikely foundation for any future agreement.

Iran is sure to make Israel an issue during negotiations despite their being excluded from the text of the Memorandum itself.

Yet the Memorandum is a starting point for new negotiations. That is not nothing.

War hawks will push for no negotiations and more bombs.

Democrats and corporate media fabulists have excoriated President Trump for this war with Iran. President Trump has pulled together a plan to end the war, which Democrats will again excoriate. President Trump will remain wrong in their eyes, simply because he is Donald Trump and for no other reason.

War hawks and Democrats alike, however, are faced with one awkward reality: their attempts to deal with Iran's nuclear weapons program have been spectacularly unsuccessful. While there is a significant probability this attempt will not have any better success, the singular question remains: what is the alternative?

President Trump’s critics have been completely silent with respect to realistic alternatives to his strategy thus far. For that reason alone it makes more sense for President Trump to at least attempt a different diplomatic tack.

Will the Memorandum of Understanding hold? Will it lead to a lasting deal on Iran's nuclear weapons ambitions?

We do not know, and cannot know. We can hope, however, and we absolutely should.

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Earlier this afternoon, Pakistani Prime Minister announced that a deal had been reached between the US and Iran, with a formal signing ceremony to be held next Friday.

The question that began the day has now been answered in the affirmative. There will be a deal, which means there may actually be peace.

However, while we have announcements of a deal, what we do not have is any official text of that deal. We have a deal, but no details.

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Deal Against All Odds

While President Trump had been quite upbeat and bullish that a deal would get done today, there were many reasons to doubt if even this much of a deal would happen.

Throughout the day there were even more reasons to doubt if this would happen.

The Iranian Majlis (Parliament) decided to inject itself into the mix, asserting its need to review any agreement before it could be final.

The prospects were not enhanced by Iran’s circulating multiple versions of the proposed agreement.

That Hezbollah and Israel were continuing their tit-for-tat strikes was definitely not helping to further the cause of peace.

Somehow, through all the negativity and unhelpful actions by allies on both sides, at the day’s end a basic agreement was apparently reached by the parties.

No One Knows What Is In The Deal

While there is quite a bit of hooplah about there being a deal between the US and Iran, there has been very little in the way of official details about the deal itself.

Even corporate media, when reporting on Sharif’s announcement of the deal, acknowledged that little was known about the particulars of the deal.

“Following intensive talks, we are pleased to announce that the Peace Deal between the United States of America and Islamic Republic of Iran has been REACHED,” Sharif said on X.

He continued, “Both sides have declared the immediate and permanent termination of military operations on all fronts, including in Lebanon.”

A signing was scheduled for Friday in Switzerland, Sharif said.

No other details of the agreement were immediately available. The White House did not immediately respond to requests for comment.

However, shortly after the announcement Reuters released what the Khamenei regime claimed were the key points of the deal:

STRAIT OF HORMUZ:

* Iran immediately reopens the ​Strait of Hormuz to all commercial vessels, while the U.S. ⁠lifts its naval blockade on Iranian ports. The lifting of the U.S. blockade would ​begin immediately after the memorandum is signed and be completed within 30 days.

FINANCIAL:

* ​The U.S. agrees not to impose any new sanctions on Iran until a final deal is reached.

* Following a final agreement, all U.S. and U.N. sanctions on Iran would ​be lifted according to an agreed timetable.

* The U.S. will waive oil sanctions ​on Iran for a specified period, allowing Tehran to sell oil and receive revenue.

* The ‌U.S. ⁠agrees to release $25 billion of Iran’s frozen assets, including via direct cash transfers, cooperation among regional countries, and financial credit lines.

* Washington, in coordination with its regional allies, would prepare a reconstruction and development plan for Iran, to ​be negotiated and agreed ​with Tehran within ⁠60 days.

NUCLEAR:

* Tehran agrees that it will neither produce nor acquire nuclear weapons.

* Pending a final agreement, Iran would maintain ​the current status of its nuclear programme, refraining from further ​uranium enrichment ⁠and expansion of nuclear facilities.

* The United States agrees to allow Iran to dilute its stockpile of highly enriched uranium on Iranian soil under a future comprehensive ⁠agreement.

* Iran’s ​nuclear programme, uranium enrichment activities and mechanisms ​for handling its stockpile of highly enriched uranium would be negotiated within 60 days of the memorandum ​and addressed in a final agreement.

These points have not been confirmed by the Trump Administration.

Are these the point to which the Trump Administration has agreed? Until we see the official text of the agreement, or until these points are confirmed by Donald Trump, we cannot be sure that they are.

The Terms Are Troubling

The most significant term in the Reuters list is, of course, that the Strait of Hormuz is to be reopened and made freely navigable. If that comes to pass, Persian Gulf oil flows once more, and a global stagflation crisis might be averted.

Also significant is an apparent agreement to allow Iran to “downblend” its stockpile of enriched uranium, lowering the enrichment level to presumably the civilian range of 3%-5%. While there would be an obvious comfort factor in removing the fissile material from Iran altogether, if the enriched uranium is downblended to civilian levels, Iran no longer has “breakout" capacity, where it can quickly enrich its store of 60% enriched uranium to the 90%+ needed to produce a nuclear weapon.

Downblending is arguably in line with the earlier “red lines” established in the first round of Islamabad talks with Iran:

As I have noted previously, the US “red line” conditions are easily and succinctly stated:

• Iran will not enrich uranium

• Iran will not pursue nuclear weapons

• Iran will not develop long range ballistic missiles

• Iran will not maintain its network of terror militias across the Middle East

• Iran will not close the Strait of Hormuz

• Iran will not threaten Arab states in the Persian Gulf

Downblending lacks the finality of complete removal of the fissile material, but downblended uranium eliminates “breakout” capacity where Iran can quickly complete the steps necessary to create a nuclear weapon.

What is troubling is the assertion that the United States will release some $25 billion in frozen Iranian assets. We must remember that Donald Trump has previously said very explicitly the US would not be paying Iran off.

If we take the Reuters report at face value, we can anticipate Iran arguing that the $25 billion in frozen assets is to be released at once. However, it is also possible that President Trump envisioning releasing the frozen assets one the enriched uranium is verifiably downblended—a “pay for performance” standard that is not out of line with what the Trump Administration has said previously on this point.

Equally problematic is the establishment of a “reconstruction fund” to help rebuild Iran.

On the surface, this is perhaps the most reasonable “ask” of the Iranian negotiating team. Iran’s infrastructure was already decrepit before the war began. Fresh rounds of bombing during Operation Epic Fury certainly did not help improve that infrastructure.

No matter who is in charge, Iran needs to rebuild its infrastructure, and that is going to require outside investment.

However, that puts the IRGC on the wrong side of whatever strings a Trump Administration would attach to a reconstruction fund. It would be a simple matter for President Trump to tie reconstruction funding to the successful and verified demolition of Iran’s nuclear weapons program.

Is that what will happen with the reconstruction fund? Of that I have no idea. Remember, this list of negotiated points is what Iran claims were in the agreement—this list might not be the negotiated points at all.

Per Iran’s Tasnim news agency, we won’t see the final text of the agreement until after the signing ceremony next Friday. The delay presumably reflects Iran’s deep distrust of the United States (although how not releasing a text to which both sides have already agreed in full helps is not made clear).

Will The Deal Hold?

What we know today is that we have a deal.

We do not know the terms of that deal. We are not going to know the terms of the deal for at least a few more days.

We do not even know if the deal will hold. Hezbollah and Israel might pop off at each other and derail the entire process. Iran might be slow in clearing their mines from the Strait of Hormuz. A dispute over when/if frozen asset funds are to be released seems almost sure to arise.

Any one of these outcomes—and quite a few more besides—could lead to the collapse of any peace deal and a return to a state of war between the United States and Iran.

What we know is today is that we have a deal. We will not know more than that until next Friday. Even then, the full ramifications of both the deal and the war are not likely to be known at that time.

The US and Iran have apparently made a deal to give peace a chance.

We have that deal. We just do not have any of the details making up that deal.

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While there have been quite a bit of media fulminations about the deal, as well as what it may or may not say, what there has not been is a full and complete recitation of the deal’s text itself.

There appears to be a deal about to be reached. What that deal involves no one knows. We do not know to what the US and Iran are prepared to agree.

Media reporting is that a deal is about to be signed.

Will there be a deal signed today, or at all? The world wonders….

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A Deal Will Be Done…Maybe

The headlines set the narrative quite plainly: the United States and Iran are on the cusp of a deal to end the war between them.

That is the thrust of the Associated Press’ reporting:

The Epoch Times’ reporting was similarly hopeful.

Even the principals were eager to weigh in, with Pakistan Prime Minister Shehbaz Sharif taking to X on Saturday to announce the imminent anticipated signing of a presumably historic peace deal.

As of this writing, there has been no signing ceremony, and no deal has been officially reached.

Details Do Not Matter To The Commentariat

The lack of a deal, or even a publication of the official text being negotiated, has not stopped the commentariat from pontificating about the presumptive “deal”, and whether it is a good or bad deal.

One notable assertion presumably making the alleged deal good for the United States comes from corporate media’s favorite information source, the unnamed “senior US official.” The unnamed source has repeatedly assured reporters that Iran was agreeing to surrender its stockpile of enriched uranium.

A senior U.S. official on Friday said that under the deal, Iran’s highly enriched uranium will be destroyed and Tehran could make a long-term commitment not to procure a nuclear weapon.

The surrender of the enriched uranium would be a significant statement by Iran. While Iran has long said it was not seeking to develop nuclear weapons, they have openly admitted to possessing enough enriched uranium to produce as many as 11 nuclear weapons, based on comments reportedly made to US Special Envoy Steve Witkoff prior to the start of Operation Epic Fury.

The Iranian negotiators reportedly told Witkoff and US President Donald Trump’s son-in-law Jared Kushner “directly and with no shame” that they control 460kg. of 60% enriched uranium, and were aware that it could be quickly enriched to 90% in order to make nuclear bombs, Witkoff said.

The Iranians were proud that they had evaded all oversight protocols to achieve this, he added.

Listing out the situation, Witkoff reported that Iran possessed approximately 10,000kg. of fissionable uranium, which is broken down into roughly 460kg. of 60% enriched material, 1,000kg. of 20% enriched material, and the remainder at 3.67%.

Agreeing to surrender this stockpile or have it “downblended” to levels suitable for civilian purposes is a gesture of intent Iran has steadfastly refused previously.

That Iran has been enriching uranium to levels useful only in nuclear weapons manufacture has been a reported stated of affairs since at least 2021. Last year, during the Twelve Day War with Israel, Iran defended its enrichment program, claiming that it was not a violation of the Nuclear Non-Proliferation Treaty.

There was never a question of Iran possessing 60% enriched uranium, nor of Iran’s intent to enrich that stockpile further to 90%, the threshold level for turning fissile uranium into a nuclear weapon.

However, Iranian state news media has repeatedly published what it said were the 14 points in the “Memorandum of Understanding” being negotiated, which contained no such commitment to either surrender or downblend Iran’s store of enriched uranium. Rather, the Iranian draft of the MoU clearly punts that question into a negotiation cycle after this deal is signed and implemented.

Another criticism of the deal (based on what Iranian state media has reported) has been the proposed removal of sanctions on Iran, with several critics asserting that even a temporary waiver would weaken the effect of sanctions and deny US negotiators future leverage.

Significantly, President Trump took to Truth Social to push back against that claim, and to rebut the rest of Iran’s reported text of the deal.

As of this writing, an official, verifiable text of the proposed Memorandum of Understanding still has not been released to the public, and so no member of the media has any actual knowledge of what the Memorandum says. No member of the media can render any informed opinion about the structure of the deal, or the obligations it imposes upon the United States and Iran.

This is not to say the deal is either good or bad. This is to say that, as of this writing, all of the media commentary the past few days about this latest “peace deal” is complete and total nonsense. There is no informed commentary to be had about the deal because there is no reliable information about the deal. For obvious reasons, assertions by the individual parties to the negotiations are not reliable information unless both sides are in agreement.

Will Iran Accept The Deal?

Even if a deal is nominally signed by representatives of the Khamenei regime, it is far from certain the deal will be accepted by the rest of the regime. Already there are reports of Iranian officials attempting to reassure the regime that a signed peace deal is not a craven act of surrender, even though the deal itself is highly flawed.

Meysam Zohourian, a member of parliament’s economic committee, said phrases such as “turning victory into defeat” or “turning Iran into a colony” were exaggerated and inaccurate, and did not match the current text despite its flaws.

That is not a statement one makes about an agreement that has broad domestic support. No matter what the actual text of the deal may say, we already have reason to doubt the Khamenei regime will be either able or willing to uphold its side.

There are reports of public protests in Iran against the deal, with Iranian women chanting threats against Iranian Foreign Minister Abbas Araghchi, one of the principal negotiators working on the Memorandum of Understanding.

In a video shared by Fars news agency, women in black chadors chanted “death to dishonorable Araghchi, the infiltrator” in front of the building, while waving red and black flags.

The protest comes as the peace deal touted by US President Donald Trump and mediator Pakistan faces opposition from hardline Iranian figures.

They argue that it does not serve Iran’s interests and would deprive Tehran of leverage over the Strait of Hormuz. They also accuse Iranian negotiators of having made too many concessions to secure the deal.

We should note that the Iranian people have no more reliable information about the actual text of the Memorandum than Americans. What they are protesting about the deal may or may not be actually in the deal.

Without speculating on the extent to which such protests are organic demonstrations by the Iranian people or staged events by the Khamenei regime, the reporting is still that there are demonstrations in Iran against the agreement by people who do not have access to any official text of the Memorandum.

Lately, Iranian state media has even been airing interviews casting a fair bit of shade on the Pakistani role in negotiations with the US, claiming Pakistan wasn’t mediating but rather delivering assassination threats.

That is not the sort of commentary Iranian state media wants to see if the objective is to build confidence in the deal when (if?) it is signed.

Regardless of the quality of the deal, if the Khamenei regime signs the deal it will be under a certain domestic pressure to convince the rest of Iran that the deal is a success for Iran. Authoritarian regimes rarely survive if they admit defeat in anything.

The Khamenei regime has to spin any deal it signs as a victory, and if it cannot do so it is unlikely the regime will want to sign such a deal. A deal which will be seen as a defeat will be a body blow to the regime.

We will have no insight into the Khamenei regime’s capacity to present whatever deal is being signed as a victory for the regime until we see the official text of the deal that is being signed. As of this writing, we do not have that text.

Israel-Hezbollah War A Threat? Or An Excuse?

Of course, the constant complication throughout the process of peace talks with Iran has been Israel’s war with Hezbollah. Iran has repeatedly connected peace talks with the United States and the fate of Hezbollah in Lebanon.

While Israel and the US have sought to separate Israel’s occupation of southern Lebanon from the wider US-Israeli war on Iran, Iran has consistently stated that it will not entertain a peace deal that does not extend to Lebanon as well.

The continued hostilities between Israel and Hezbollah have for weeks been at risk of proving to be a last-minute show-stopper derailing any substantive peace effort with Iran.

Even as President Trump was taking to Truth Social to boast about the deal’s imminent signing, Israel launched fresh attacks into Beirut against the terrorist militia.

The IDF said in a statement that it "precisely struck a Hezbollah infrastructure site in Dahieh, Beirut." The army later described the site as a command center "used by Hezbollah terrorists to advance terrorist attacks against the citizens of the State of Israel and IDF soldiers operating in southern Lebanon."

President Trump himself publicly expressed disappointment with Israel over the attack, and especially its timing.

Despite the attack, the Trump Administration continues to project confidence that the deal will yet be signed, with Secretary of War Pete Hegseth taking a measured middle stance on Israel and Hezbollah, and the prospects of that conflict preventing a peace deal with Iran.

“From all I know, we are on track. It’s not a matter of if, it’s a matter of when,” Hegseth said on CBS News’ “Face the Nation.”

“We’re attuned to what’s happening with Hezbollah firing rockets into northern Israel, which they need to stop doing, and Iran needs to encourage them to stop doing that in very adamant ways,” he said.

Hegseth said Israel was “very measured in its response,” adding that it understood “we’re on the verge of a deal.”

“I don’t expect that to disrupt,” he said. “If Iran wants this to hold, they need to pull back Hezbollah, no doubt.”

The rhetoric coming from Iran’s military command, however, is not nearly as optimistic, with the military vowing retaliation for the latest Israeli attack on Hezbollah.

“The sacred ideal of the liberation of Jerusalem and revenge for the blood of Ali Khamenei will never be forgotten,” Abdollahi said.

He added that Iran was waiting for the “smallest mistake” from the enemy to “teach them an unforgettable lesson.”

One clear take-away from Iranian rhetoric is that Iran’s military is at least claiming to be at the same readiness level as US forces in the region. Neither side indicates they are willing to show forbearance on even the slightest provocation.

We see evidence of this in Saturday’s reported Iranian drone attacks on shipping in the Strait of Hormuz, with US Central Command reporting to have swatted them all down.

Last week the US and Iran exchanged a series of significant strikes after an Iranian drone collided with and downed an Apache attack helicopter.

Rabobank’s Ban van Geffen, writing in ZeroHedge, speculated last week that the tenuous ceasefire between the US and Iran, which has more or less held since April 13, was on the verge of breaking down and ending completely.

The US and Iran are still at odds over the frozen Iranian assets, which Iran wants released as part of any deal. But, yesterday, President Trump said that he will not unfreeze any amount of Iranian assets, nor lift sanctions, immediately after a deal is closed: “If they behave, if they do a good job, we start talking” about unfreezing these assets, he said.

And, if it is up to the US Treasury, there may be few assets left by the time Trump is willing to talk. The Financial Times reports that Treasury Secretary Bessent is considering using the Iranian assets to pay for the rebuilding of Gulf countries that were hit by Iranian attacks. So, we’ve now moved from “the US and Gulf countries help with the reconstruction of Iran” to “Iran pays to rebuild the Gulf countries.”

On top of that, new attacks put further pressure on the negotiations, and on the fragile ceasefire that was tacitly extended while negotiations are ongoing. US Central Command reported it took down two Iranian drones that threatened marine traffic near Hormuz, after Iran also fired missiles at Kuwait on Wednesday and at Bahrain on Friday. The US, meanwhile, has struck Iranian radar and surveillance sites.

Fighting between Israel and Hezbollah is also still ongoing. Defence Minister Katz said the country’s air force had launched a strike on a command center in one of Beirut’s suburbs, in response to Hezbollah’s continuing attacks on Israel.

For all the assurances from the Trump Administration that this deal will be signed, there are still multiple forces in play which have the potential to at least delay, if not completely derail, the signing of the Memorandum of Understanding.

No Deal—Yet

As of this writing, the Memorandum of Understanding has not been signed by either side.

As of this writing, the text of the Memorandum of Understanding has not been released.

As of this writing, the odds are excellent that by the time I finish publishing this article the deal will have been signed, rendering everything said here moot.

Will there be a peace deal between the US and Iran? President Trump says yes, and says it will happen today.

Is President Trump right? The world wonders…and waits.

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The May PPI report presents the latest indicator that not only is inflation rising in this country, but also that it is likely to continue to rise for at least a few months more.

At a minimum, the risks of a fresh hyperinflation cycle are growing, given that producer price inflation rose significantly in May.

The Producer Price Index for final demand rose 1.1 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 1.1 percent in April and 0.7 percent in March. (See table A.) On an unadjusted basis, the index for final demand increased 6.5 percent for the 12 months ended in May, the largest 12-month rise since moving up 7.4 percent in November 2022.

Not only was the 6.5% increase the largest year on year increase since the 2022 hyperinflation cycle, it was also above Wall Street’s projections (although it printed below the Trading Economics forecast).

Of course, there is no real mystery behind the inflation surge: the immediate cause is the disruption of Persian Gulf oil flows by Iran’s illegal closure of the Strait of Hormuz. While the cause is known, however, the ultimate consequence is much less certain.

If the Strait remains closed for a number of months, oil prices are projected to rise much higher, injecting 1970s-style stagflation into virtually all the world’s economies.

If there is a peace deal with Iran and a reopening of the Strait, Persian Gulf oil flows might begin to recover, and stagflation might be avoided.

The key word in both scenarios: “if”. The Producer Price Index is telling us that more inflation and possibly stagflation is on the way. It is not telling us just yet how bad either one will be.

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The Month To Month Rise Was Unexpected

Wall Street and corporate media were caught off guard not by the rise in producer price inflation year on year, which printed just 0.1pp above projection, but by the month on month gain of 1.1%.

Wall Street had been expecting a month on month rise of 0.7%.

Clearly, Wall Street was disappointed.

The miss was large enough that CNBC found that to be the most notable aspect of the PPI report itself.

The producer price index, a measure of final demand costs, increased a seasonally adjusted 1.1% on the month, putting the 12-month wholesale inflation rate at 6.5%. Economists surveyed by Dow Jones had been looking for a monthly move of 0.7%.

CNN was similarly impressed by the month on month figure.

To their credit, corporate media remained largely factual in their reporting of the PPI, a departure from their gaslighting and foolishness over the CPI report a day earlier.

A long-held presumption with some historical validity is that the Producer Price Index gives visibility into what consumer price inflation is going to do over the next few months. A larger-than-expected rise in the PPI to 6.5% year on year indicates that consumer price inflation itself is highly likely to rise even more from 4.2% year on year over the summer at least.

How much more inflation are we likely to see? The data is far less clear on that point.

Headline PPI Inflation, Core PPI Disinflation

In a repeat of the May CPI print, the month on month inflation figure for headline PPI increased slightly, while the month on month figure for core PPI decreased.

Even the year on year print showed a different trend for the core figure than the headline figure.

Core PPI showed disinflation month on month, and almost no change year on year.

While headline inflation did rise month on month, we should also note that the increase was marginal. When we look at the Producer Price Index itself, we see the headline PPI increasing April to May in very close to linear fashion, but core PPI slowing noticeably.

Indeed core PPI and headline PPI have been diverging since January, and the spread between the two indices is larger now than it has been since President Trump took office in January 2025.

The signature difference between the headline and core data, of course, is the inclusion of energy data in the headline index, and the exclusion of it from the core index.

Arguably, we are seeing headline inflation continuing as it has been for the past few months, but core inflation continuing print slower and lower numbers each month.

Is that a forecast for more energy price inflation but with very little contagion affect? That is certainly one interpretation, and a plausible one.

No Surprise Here: More Energy Price Inflation

That energy price inflation increased within the PPI is hardly surprising.

Somewhat surprising, however, was the continued deflation for unprocessed fuel.

Meanwhile, processed fuels felt some price pressure and moved up.

Even more surprising is that retail fuel costs declined in May.

This is in line with the behavior of benchmark oil prices, which, as I noticed in discussing the CPI report, also declined in May.

Yet if oil prices declined, and retail fuel prices declined, what is pushing energy prices up?

Goods Prices Once Again Driven By Energy

Goods prices rose substantially in May, pushed up to 2.8% month on month.

However, just as with the CPI print, there’s no mystery as to the cause—energy price inflation. Putting goods and energy side by side makes that self-evident.

If we strip food and energy prices out from goods prices, we see a much smaller increase.

Just as with the CPI, the PPI is signaling inflation for energy goods, but not for other types of goods. The potentials of a contagion effect, where inflation spreads throughout the economy, do not appear to be on the horizon just yet.

Food Price Inflation Coming?

We should note that food price inflation itself did rise somewhat, although the primary increase within the PPI has been due to energy prices.

The lack of food price inflation may not last, however. Nitrogenous fertilizer prices have been rising since early 2025.

While month on month May’s increase was not as large as April’s, we are still watching fertilizer become more and more expensive over time.

Fertilizer is essential to high crop yields, obviously. If fertilizer prices increase enough to impact fertilizer usage in agriculture, we can reasonably expect food prices to rise some time thereafter, as harvests come in.

Rising nitrogenous fertilizer prices indicates that at least some food price inflation will begin to show up in the not too distant future. It might not be a whole lot but some food price inflation is coming.

Intermediate Demand Rising

The one ominous data within the Producer Price Index Summary remains the intermediate demand data set.

Producer price inflation for Stage 1 Intermediate Demand in particular has been rising steadily since last fall. Stages 2 and 3 have been right behind.

This is producer price inflation within the supply chain. Rising inflation within Intermediate Demand indicates that goods which are used to produce other goods are becoming more costly. Eventually, these inflationary price pressures have to result in higher prices for items.

Rising inflation within Intermediate Demand is a forecast that goods prices are poised to increase. They may not increase next month or the month after, but increased costs of inputs eventually will result in higher prices for various items.

Will It Be Stagflation?

The Producer Price Index Summary is telling us that there will be quite a bit more inflation, and specifically energy price inflation. Consumer price inflation is not done rising.

Will it simply be inflation, perhaps hyperinflation? Will it be stagflation?

The PPI is not going to answer that for us, because it can’t. To answer that question we have to look outside the data, at the underlying drivers of that data.

It is already well established that the catalyst for recent increases in both producer price and consumer price inflation has been the disruption of Persian Gulf oil flows. That disruption is ongoing, as IMF Portwatch data on oil volumes moving through the Strait shows.

Despite the loss of some 20% of global oil supply, oil prices have stabilized and even moved down slightly since the start of the “ceasefire” around April 13.

Arguably, this decline in benchmark crude oil prices is due in part to the releases by multiple nations from their strategic petroleum reserves. We can see, for example, that US oil inventories, both commercial and the SPR, have dropped near lows last seen during and after the 2022 hyperinflation cycle.

At the same time, China has reduced its imports of oil to a 10-year low.

Some of China’s import reductions were inevitable; a large portion of China’s oil imports come from the Persian Gulf and are now cut off. What is notable, however, is that China is not replacing Persian Gulf oil imports with imports from other regions. Instead, China is leveraging its own internal oil reserves to satiate its demand for oil.

The world’s biggest crude importer has leaned on export curbs, refinery run cuts and drawdowns from its massive inventories to cope with the impact of the loss of most Persian Gulf barrels. This has helped ease pressure on global prices, with analysts estimating China’s imports could remain subdued for months to come.

In terms of physical oil volumes, the global economy has managed to replace Persian Gulf oil with reserves held around the world. That immediately begs a simple question: when will those reserves be exhausted?

Some assessments indicate the answer is “soon”, as reserves reach floor thresholds which limit or prevent further releases.

America’s releases have brought relief beyond its shores. Many SPR barrels have made their way from salt caverns in Texas and Louisiana, through commodity traders to buyers in Europe, Asia and Latin America. Yet most analysts expect the pace of deliveries to slow in the coming weeks, from 1.4m to below 1m b/d. Pressure is dropping in the caverns, which risk damage if it gets too low. Bayou Choctaw, the smallest site, is nearly depleted, says Kevin Book of ClearView Energy Partners, a consultancy; others cannot pump more fast enough because of limited pipeline capacity. And the entire SPR has a statutory floor of 150m barrels, just 90m barrels below the level at the end of the current release.

Strategic reserves are finite quantities of stored oil by definition. Once they are depleted they are gone. When the world is no longer able to replace Persian Gulf oil with reserves, if the Strait is still closed and Persian Gulf oil flows are still blocked, the resulting oil supply shock will both drive up oil prices and compel destruction of oil demand.

As I have discussed at length previously, this is a stagflation scenario.

When prices rise because of an abrupt drop in supply—a supply shock, in other words—price stabilization will only be achieved when demand drops to align with the diminished supply.

Organically, the price increases achieve this demand destruction by driving marginal consumers and marginal consumption out of the marketplace. Central bank interest rate manipulations seek to achieve similar results by constraining and restricting consumption and demand by raising the cost of capital. Regardless of how the demand destruction is achieved, demand destruction is necessary to bring physical supply and physical demand back into equilibrium.

Note that when demand is reduced, an economy slips into recession.

Bringing this back to the May Producer Price Index, is the data signalling inflation or stagflation? Given the overall economic and geopolitical backdrop of ongoing war with Iran and continued closure of the Strait of Hormuz, the prognosis leans heavily towards stagflation.

This could change. As of this writing, President Trump is touting a deal that has presumably been reached with the Khamenei regime in Tehran. Current reporting is that the deal includes reopening the Strait.

If the Strait reopens, much of the stagflation scenario can potentially be averted. It will take time for oil flows to return to normal, and depending on what has happened to Persian Gulf oil production—in particular how many wells have been shut in—some production may not come back for a period of months or even years.

That would be an inflation scenario. Prices would rise in the short term, stabilize, and potentially even come down in the long term.

If the Strait does not reopen, the stagflation scenario is simply a matter of time before oil reserves are depleted and oil prices start rising.

The May Producer Price Index Summary is telling us that higher prices will come throughout the summer, that at least some inflation is already “baked in” to the economy.

Whether that inflation turns into stagflation depends entirely on whether there is peace with Iran and a reopening of the Strait of Hormuz.

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We need to remember that when discussing the May Consumer Price Index Summary, because while corporate media speaks in almost reflexively pearl-clutching terms of inflation “jumping”, the data tells a different story.

The all items index rose 4.2 percent for the 12 months ending May, after rising 3.8 percent for the 12 months ending April. The all items less food and energy index rose 2.9 percent over the year, following a 2.8-percent increase over the 12 months ending April. The energy index increased 23.5 percent for the 12 months ending May. The food index increased 3.1 percent over the last year.

At year on year inflation of 4.2%, the May CPI print was right in line with Wall Street projections, and just slightly above the Trading Economics forecast of 4.0%.

At 4.2%, the CPI print also came out exactly where the Cleveland Fed’s inflation nowcast projected.

4.2% year on year is quite a bit more inflation than what we had in February, before the start of Operation Epic Fury and Iran’s illegal response of closing the Strait of Hormuz.

However, we must also remember that year on year inflation for April was 3.8%. For March it was 3.3%, and for February it was 2.4%.

In other words, the big “jump” in consumer price inflation happened in March, and we are actually seeing disinflation since then, meaning inflation increased by less in May than in April, and less in April than in March. The energy price shock is, for the moment, proving to be a good deal less shocking than originally anticipated.

The blunt reality is that corporate media is once again peddling a narrative untethered from the facts. Either they are lying (again) or they do not know how to read the data, but inflation did not “jump” in May. That happened in March.

I leave the reader to decide how much of the media’s gaslighting is from malice and how much is from simple stupidity.

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Corporate Media IS Gaslighting

We only have to look at the headlines corporate media outlets are using to describe the May inflation report to see the narrative they wish to advance.

There is the New York Times getting the data exactly wrong:

CNN, still the most busted name in Fake News, decided to be equally factually challenged about oil prices (oil prices came down in May).

Even Bloomberg chose a headline that was somewhat to the left of accurate.

Gasoline prices did rise significantly in May, but the increase was nowhere near the surge we saw in March.

Consumer price inflation rose in May, and rose significantly. The data does confirm that much.

What the data does not confirm is the presentation of inflation rising at an increasing rate. That did not happen in May. Overall, consumer price inflation rose at a slower rate. Inflation decelerated. Inflation did not accelerate in May.

When inflation rises at a slower rate, that is called “disinflation”. That is what we have in the May report.

All Rates Of Change Matter

As anyone familiar with a dictionary can quickly verify, “accelerate” means to go faster. When we look at the year on year inflation graph for the Consumer Price Index, do we see evidence of acceleration? No. We do not.

When a graph bends down even a little, that means the rate of change has decreased, and close inspection of the data confirms what the eye can see plainly looking at the graph: from March to April to May it bends down.

At 4.167% in May, year on year inflation rose 0.388pp from April’s 3.779%, which represented a 0.493pp rise from March’s 3.286%.

In order for inflation to have accelerated (or “jumped” or “surged”) in May, the change from April would have had to have been greater than the 0.493pp from March to April. As the change from April to May was less than the change from March to April, what the data shows is inflation rising more slowly in May than in April.

We can see this even if we just look at the raw index graph for both headline and core CPI.

Just the fact that both graphs bend down moving from March 2026 to April 2026 to May 2026 is itself absolute proof that inflation slowed in May. It did not slow by much, but what it absolutely did not do is rise faster.

Even when we look at the month on month chart, we see less of headline and core inflation in May than in April.

This is not to say that inflation did not rise significantly in May. It did. Because inflation rose in May, the “Real Misery Index”—consumer price inflation plus real unemployment (including those persons not in the labor force but who want a job now)—also increased.

We must also recognize that, with the May inflation print, inflation is once again outpacing earnings even for the higher paying goods producing jobs.

We cannot say the May inflation report is good. Consumer price inflation rose 4.2% in May, and that is not at all good.

It also rose less in May than in April.

When inflation was printing north of 9%, such disinflation was of great interest to corporate media. The reader is left to draw their own conclusions why corporate media is not interested in such disinflation now (*cough* “Trump!” *cough*).

Energy Price Inflation Almost Unchanged

We still have energy price inflation in May. What we do not have is considerably more energy price inflation in May than in April. 3.80% to 3.88% is not considerably more inflation month on month, particularly for energy.

Even with the components of the energy index, we have more disinflation than outright inflation.

Fuel oil and diesel dropped a full percentage point month on month, from 4.3% to 3.3%. Electricity dropped from 2.1% month on month to 0.6% month on month. Piped gas slipped into outright deflation in May, printing at negative 0.6%.

Gasoline did increase in May, rising 7% month on month, which is a significant increase over April’s 5.4% month on month. That is not a price movement shared by other energy index components.

We still have significant energy price inflation, and gasoline is a significant factor in that inflation. But overall we simply do not have more energy price inflation in May than in April. We have energy price disinflation in May. That should make a difference in how we view the data.

One reason why energy price inflation was not worse in May: Oil prices were lower at the end of May than at the beginning.

Remember how CNN said oil prices “jumped”? I think they meant to say “dropped”.

Actually, they probably did mean to say “jumped”, but the correct word would have been “dropped”, although that would have not made for nearly as gripping a headline.

Food Price Inflation Cooled, Durables Dropped

Food price inflation also did not jump in May, but cooled, from 0.5% month on month to .16%

May food price inflation month on month was actually the third lowest food price inflation print since the start of President Trump’s second term.

Durable goods printed their second consecutive month of outright deflation month on month.

It is rather difficult to credibly speak of inflation surging when the data is printing deflation.

Even nondurable goods printed disinflation month on month, from 1.4% in April to 1.2% in May.

“Aha!” I hear you shout excitedly, “1.2% is higher than it was all last year!”

That is true. For the past three months nondurable goods price inflation have been considerably above where was throughout 2025.

However….

Nondurable goods includes energy and fuel, and when we put the nondurable goods and energy indices side by side, it is immediately clear from where literally all nondurable goods price inflation month on month comes.

If nondurable goods overall showed disinflation, and energy showed marginal inflation, printing well above the nondurable goods index overall, then we most likely have nondurable goods price deflation for everything except energy.

Your Mileage Will Vary, And So Will Inflation Rates

While headline inflation year on year is a sizeable number, when we look at the components of that inflation, we see that energy is by far the only category showing significant energy price inflation.

We see that if we index the components of consumer price inflation to January 2021.

Durable goods have been in a long-term deflation trend, and even nondurable goods were largely treading water in May.

Even if we bring the index forward to January 2025, we still do not see significant inflation outside of energy.

When we pause to consider that much of the rise in nondurables is because of energy, it immediately becomes clear that we are not seeing any substantial inflation at all except for energy.

We know why we are seeing energy price inflation. The data indicates we are not seeing much inflation anywhere else.

To blithely speak of inflation “jumping” when the data shows the reality to be far more nuanced is stupidity at best, malice at worst, and gaslighting regardless. The reality is that there is some inflation beyond energy, but the bulk of May’s consumer price inflation print is energy, almost to the exclusion of everything else.

This Is Not The Stagflation Shock We Feared (Not Yet)

We should not pretend that a headline consumer price inflation rate of 4.2% year on year is a good inflation print. It isn’t.

Headline inflation rose in May, rising not quite as much as it rose in April.

Yet virtually all inflation components showed disinflation for May, rising by less than they did in April. Without energy price inflation, we might have even seen more outright deflation than we did.

Nor should we pretend that the energy price shock is not real. It is extremely real, and very likely will have some very real consequences.

We should also not lose sight of the fact that the war with Iran is ongoing, that the Strait of Hormuz is still illegally closed, and that Iran has roiled energy markets by closing off the Strait.

The forces which injected a price and supply dislocation in global oil markets, thus producing a spike in consumer price inflation here in the United States, are still present. Those forces may even be getting worse.

If (when?) the buffering effects of large scale strategic petroleum reserve releases is exhausted, and if the Strait of Hormuz remains blocked, we could very easily see another energy price shock even greater than the one we saw in March. We might even see a contagion effect as inflation moves beyond energy prices and into multiple supply chains and output channels. What China has been seeing for the past couple of months we could be seeing in the US economy within a month or two.

The disruption of global oil supplies as a result of Iran illegally closing the Strait of Hormuz and shutting off 20% of the world’s oil flows is an unequivocal stagflation force and will, if it is not buffered and marginalized, have impacts which will reverberate through the US economy.

That disruption is threatening or producing stagflation in virtually every economy on earth. That disruption has not yet produced significant stagflation in the United States.

Perhaps that is because the United States is reaping significant benefit from strategic petroleum reserve releases. Perhaps that is because the United States economy is proving to have greater strength and resilience than we might have been tempted to conclude.

Regardless of the reason, the reality is that we are not seeing any destabilizing price surges outside of energy prices, at least not yet.

That could change. If the closure of the Strait of Hormuz continues for long enough, it very likely will change. Depending on what we see in producer price inflation for May (remember, the PPI is a leading indicator for the CPI), we may see destabilizing price surges outside of energy by July or August.

We are are not seeing those destabilizing price surges outside of energy in the May Consumer Price Index Summary. Energy price inflation is up, and that is pushing headline inflation higher. That is the sum total of the inflation we are seeing.

Even at that, the inflation we are seeing in May is noticeably less than what we saw in April. The inflation we saw in April was noticeably less than what we saw in March. The energy price shock was at its most shocking in March, two months ago.

That is what the Consumer Price Index data plainly shows, but that is not what corporate media is telling you.

Corporate media is feeding up headlines that say inflation is accelerating rather than decelerating. Corporate media is feeding up narratives that say prices surged more in May than in March. Corporate media is feeding up stories on inflation that are simply not accurate, and in some instances are demonstrably not true.

Consumer price inflation for May was definitely not good. 4.2% headline inflation year on year qualifies qualifies as “bad”.

Corporate media gaslighting on the actual state of consumer price inflation for May is proving to be even worse. Again.

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For nearly three years, the labor market has looked weaker than the headline numbers suggested. Now we have a string of jobs reports indicating the reverse is now true.

Most recently we had the May ADP National Employment Report indicating the US economy is shifting from jobs recession to jobs recovery. That was a marked improvement over the April Employment Situation Summary, which indicated the jobs recession is showing signs of ending, but there are several stagflation indicators on the horizon.

Now comes the May Employment Situation Summary, which makes a very strong case for declaring a jobs recovery underway.

Total nonfarm payroll employment increased by 172,000 in May, and the unemployment rate was unchanged at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in leisure and hospitality, local government, and health care. Employment in financial activities declined.

This was not merely a strong jobs report. Total nonfarm payroll employment printed at double Wall Street’s projections, and nearly 70% above the more optimistic Trading Economics Forecast.

It is not a perfect jobs report, and we should not look for a perfect jobs report. Even so, the May jobs report carries much of what I have said would indicate a jobs recovery:

Job growth was still broadly based (although not as broad as April’s).

Wage growth does not appear to have lost ground to inflation (yet—we won’t have the May Consumer Price Index data until later this week).

The overall employment level rose for the first time in months.

There are still caveats. Real unemployment did rise slightly, although the increase in the number of individuals not in the labor force who want a job now was very nearly offset by the decrease in official U-3 unemployment.

Yet even when we drill down into the details of the May jobs report, the data points more towards jobs recovery than jobs recession.

Is a jobs recovery underway? The data has been suggesting that for some time, now, and it is increasingly difficult to deny.

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Lou Costello Labor Math?

As always, we begin by assessing the extent to which the jobs numbers are reliable. We must always take the data with a grain of salt, in part because we know there will be revisions.

We also have to reconcile the data from the two independent surveys within the Employment Situation Summary: The Current Population Survey (Household Survey) and the Current Employment Statistics (Establishment Survey).

In recent months, the Household Survey’s Employment Level has diverged substantially from the Establishment Survey All Employees data, suggesting the evils of Lou Costello Labor Math are lurking beneath the surface of the jobs report. Yet the May movements for both data sets were strikingly similar, with both showing job growth.

One month of synchronized movements does not mean the taint of Lou Costello Labor Math has been completely banished from the jobs data, but it does give an additional degree of confidence in the May data.

Even more remarkable are the revisions to the March and April data sets. The revisions were not just positive, they were extremely positive (emphasis mine).

The change in total nonfarm payroll employment for March was revised up by 29,000, from +185,000 to +214,000, and the change for April was revised up by 64,000, from +115,000 to +179,000. With these revisions, employment in March and April combined is 93,000 higher than previously reported.

We are presented with an additional 93,000 jobs for 2026 than we have had reported previously. To put that in perspective, the largest job growth number for 2025 was the April 2025 jobs report, which had a revised figure of 108,000 jobs. The revisions on the May 2026 report is on par with receiving an entire extra month of job growth.

Even more significantly, those revisions mean that the revised job totals for 2026 to date are 66,000 jobs higher than the initial reports.

Time is making the BLS data look better and not worse. We have not seen this for several years, and it is a welcome change.

Are the jobs numbers completely trustworthy? The answer is always going to be “of course not,” but between the two surveys showing similar job growth trends and the revisions trending positive rather than negative, we have reasons to be more optimistic about the May jobs data than has historically been the case.

We still need to take the data with a grain of salt, but this month’s grain is quite a bit smaller than it has been.

That bodes well for a jobs recovery narrative.

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Broad Job Growth, Especially In Goods Producing Jobs

A key indicator of a jobs recovery is that the job growth itself is fairly broad, encompassing most job sectors. The broader the job growth more indicative it is of broad increases in labor demand, which in turn drives real wage growth, which in turn powers real consumption growth and real economic growth.

While more sectors reported job loss in May than in April, job growth for May was still fairly broadly based, and broadly based for the third month in a row.

When job growth is thus both broad and deep speaking of a jobs recession quickly loses credibility.

This is one aspect of the job revisions that is especially significant. When we examined the April jobs report, job growth was not nearly as broadly based as April is printing now.

The April revisions in particular resulted in a much healthier jobs growth outlook.

Particularly encouraging is that the past three months have seen job growth across the three main goods producing sectors: Mining, Construction, and Manufacturing.

Given the 2025 had been a bloodbath for Manufacturing jobs, with Construction and Mining jobs scarcely any better, there is no denying that the Employment Situation Summary has been showing a decided trend reversal for goods producing job growth.

As I have said multiple times before, Manufacturing job growth is key to President Trump realizing his Agenda 47 objective of making the United States a manufacturing superpower, the 2026 jobs data shows we may be finally seeing the Manufacturing jobs growth needed for that goal to eventually be met.

While job growth across goods producing sectors was positive, job growth in service jobs was heavily concentrated in Healthcare and Leisure.

Healthcare has been a mainstay of job growth in this country since before the start of the second Trump Administration, and it is continuing to be a mainstay of job growth.

Leisure has been somewhat weaker in job growth over the past two years, but it has been getting stronger. This is why we look for broad job growth as a sign of jobs recovery—we want to see additional sectors pick up employment momentum without pulling it away from other sectors.

Of the three service sectors which lost jobs, Finance and Information have been losing jobs for months.

May is simply the latest in a long downward trend of job loss for both sectors.

The third sector which lost jobs was Trade, Transportation, and Utilities (TTU).

TTU jobs had been declining throughout 2025, although 2026 has been showing signs of a reversal there as well. Whether the marginal loss of TTU jobs in May marks the end of sector-level strengthening is not something we will be able to see for a couple of months yet.

The final major service sector, Professional and Business Services, is something of a cautionary note, for although the job growth is still positive, the level of growth has been diminishing in recent months.

Is the sector about to slip back into the negative, where it was for most of 2025? The trend certainly suggests that it could.

While job growth is far from perfect across the board, most job sectors are showing job growth not just for May but for most if not all of 2026 to date.

That definitely bodes well for a jobs recovery narrative.

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Joblessness Falling? Or Rising Still?

One part of the jobs recovery narrative that is still not certain is whether joblessness is rising or falling in this country.

The unemployment data from the Household Survey is a little contradictory on this point.

The official U-3 Unemployment Level declined 66,000 in May, but the overall number of real unemployed (official unemployment count plus the number of individuals not in the labor force but who want a job now) increased by 76,000. The net increase in joblessness was 10,000, which amounts to less than a 0.01pp increase in the real unemployment rate.

To make sure the unemployment waters are even muddier, we have growing evidence of a trend reversal since November of last year, with both official and real unemployment rates declining, even though the longer term trend since 2023 is still that of rising joblessness.

We see the same divergent long-term and near-term trends across the alternative “official” unemployment data.

Has a trend reversal taken place, such that joblessness is now on the decline in this country?

The evidence of that is accumulating, and that evidence augurs very well for a jobs recovery narrative.

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Employment Level Rose In May

Amplifying the improvement in the unemployment data is the increase in overall employment per the Household Survey.

The Employment Level had been declining in this country (which immediately challenges other job growth narratives), but in May it printed an increase of 149,000 workers.

One month does not make for a trend reversal, but with the Employment Level well below where it was when President Trump took office, any sign of improvement is going to be welcome. If the Establishment Survey figures of job growth withstand scrutiny, we should expect to see the Employment level trending up again in the near future.

Naturally, the Employment-Population Ratio also increased in May, and was likewise a welcome change from a steady rate of decline.

With any luck, the marginal increases for both numbers will continue. Rising employment levels and a sustained but increasing Employment-Population Ratio would be an extremely prominent pair of jobs recovery signals.

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Wage Growth Still Not Quite There

Nominally, wages rose across all job sectors in May. Whether wages rose enough to keep pace with resurgent inflation remains an open question for May.

While wage growth has done better in recent years, most sectors still have not seen enough wage growth to overcome the income reduction effects of the 2022 hyperinflation cycle. Goods producing jobs did largely recover from the 2022 cycle, but consumer price inflation’s recent uptick as a result of Iran illegally closing the Strait of Hormuz is threatening could pose another setback.

Wage growth will be a problematic data point for some time, as there have been only three job sectors where weekly earning have overcome the effects of the 2022 hyperinflation cycle: Leisure, Professional Services, and Construction.

Of those, only Leisure has printed strong enough wage growth to plausibly weather currently resurgent inflation. The wage recovery within Construction and Professional Services is marginal enough that any significant increase in consumer price inflation will eliminate those sectors’ real wage gains.

While oil prices have moderated as of late, we should continue to anticipate ongoing energy price inflation and a still-reverberating energy price shock.

Depending on whether inflation prints hotter or cooler for May will determine whether wages kept pace with current inflation or lost ground to rising inflation.

But for the energy price shock and resulting energy price inflation, wage growth in this country arguably would look much better relative to inflation than is does at present. Of course, we do have energy price inflation and that does diminish real wage growth overall.

Even so, until we see the May consumer price index data, we do not see inflation having discernible impact on real wages—not yet.

Wage growth provides the weakest and most problematic support for a jobs recovery narrative. Perhaps the most balanced assessment of the wage data within the jobs report is that May wage growth does not undermine a jobs recovery narrative, even if it does not necessarily provide clear support for that narrative.

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Stagflation Signals Status?

With the ceasefire between the US and Iran having technically “held” since mid-April, the status quo in the Persian Gulf has not changed much.

Iran still has illegally closed the Strait of Hormuz. The US is still blockading Iranian shipping.

As of May 31, tanker traffic through the Strait is still virtually nil.

Overall cargo volumes are equally nonexistent.

Because the Strait is still virtually completely closed, all the stagflation pressures we have seen for the past couple of months are still present.

In particular, oil production in the Persian Gulf has plummeted.

Only the United Arab Emirates has managed to regain any of its lost oil production.

The major industrial economies of the world have so far been able to buffer the resultant supply shock with releases from strategic petroleum reserves.

If the current drawdown trend continues, there is a point in the near future when total global observed oil inventories, including strategic reserves, will no longer be able to buffer the supply shock. When that happens, oil and energy prices are going to move sharply higher.

Currently, energy prices have been moderating, with oil prices trending down from their earlier peaks.

When the buffering of strategic reserve releases is exhausted, this moderating trend will cease. Oil prices will move sharply higher, carrying other commodities prices higher (as they have already done). Global stagflation is largely baked in without a quick peace deal, and even then we might see some of this.

While the price and supply shock side of the stagflation scenario is almost sure to happen, given the lack of progress on peace talks, we have to also remember that stagflation is the collision of inflationary price shocks with the deflationary forces present in a weak or underperforming economy.

If job growth is strengthening in this country, if the economy is therefore growing more or less strongly, then the stagflationary impact of the price and supply shock in energy is reduced in direct proportion to the growth.

Stagflation requires a weak or underperforming economy. Strong job growth would mean a strong and potentially overperforming economy.

If the job growth reported in the Employment Situation Summary over the past few months continues for the next two to three months, when the next price and supply shock does hit the US economy—which most prevailing forecast anticipate in the next one to three months—the US economy may be in a stronger position to withstand that sort of body blow.

The stagflation signals are not going away, nor are they even really diminishing, but the strengthening job markets raise hope that the ultimate stagflation impact arising from the disruption of Persian Gulf oil flows will be proportionally muted.

The best way to avoid 1970s-style stagflation in the US is for there to be an actual jobs recovery over at least the next few months.

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No Question: May Is A Good Jobs Report

There is no disputing that the May Employment Situation Summary is a good jobs report.

There is also no disputing that the May ADP National Employment Report is a good jobs report.

The April JOLTS report is more problematic, but it also points to there being at least some job growth in April.

Over the past few months, the jobs reports have reported steadily improving outcomes. We are seeing more and more job growth, and we are seeing it in more and more job sectors.

There is no denying that is what a jobs recovery should look like.

If we can be certain the trends of the past few months will be the trends of the next few months, there would be no question that we were in the midst of a jobs recovery.

That uncertainty about the future is the only restraint on calling a jobs recovery is now underway. If job growth suddenly stops next month, or reverses in a big way as it did in February, the jobs recovery narrative would sound immediately foolish.

If job growth continues, not calling the jobs recovery would also sound immediately foolish.

Is a jobs recovery underway? For now at least, yes, it is. Since March, we are seeing improving job growth numbers. Since March, the revisions to the jobs report have been positive. Wages are growing, and the only reason they might not keep pace with consumer price inflation is the resurgence of consumer price inflation.

We should be mindful that this is a very young jobs recovery. It likely will not take much to snuff out this recovery effort, and the price and supply shocks likely heading towards the US economy over the next couple of months definitely fit within the concept of “much”.

For now, we have a jobs recovery. After nearly three years, we are seeing meaningful job growth in the US economy. We cannot say how long this recovery will last, but it is appropriate to celebrate the jobs recovery while it does last.

The May Employment Situation Summary is a good jobs report which shows a jobs recovery is underway. 2026 is so far a good year for job growth.

That’s good news. We should enjoy it while it lasts (because it may not last).

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The May ADP National Employment Report presents a case for a nascent jobs recovery that is difficult to ignore, with a jobs print showing 122,000 jobs were created last month.

It certainly is difficult to challenge ADP Chief Economist Dr. Nela Richardson’s assessment of the report.

Hiring was more broad-based in May than we’ve seen in the last few years. The labor market continues to show sustained momentum going into the summer hiring season.

The report surpassed Wall Street’s increasingly optimistic consensus projection, and completely blew pass the Trading Economics forecast.

Another encouraging note: ADP’s revisions to the April report amounted to a relatively minor reduction, from 109,000 jobs to 105,000 jobs—still a strong headline jobs figure.

Is the jobs recession really over? At the very least we must acknowledge the increasing number of signals that it is.

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Across The Board Growth

What makes the ADP report compelling is not merely that there was broad based jobs growth, but that there is a growing trend of broad-based jobs growth. May was the third consecutive month that nearly all jobs sectors showed at least some employment increase.

Aside from the March bloodbath in Trade, Transportation, and Utilities, the ADP report has shown job growth across most every sector.

Equally encouraging is that job growth has been spreading across all employer sizes.

In March, job growth was almost exclusively concentrated in small establishments. In May, while small establishments still led the way, larger firms are also adding jobs.

Just on these two metrics alone we can say that the ADP report is a strong signal that a jobs recovery is underway, with jobs growth that is both broad and increasingly deep.

Stepping back and looking at a longer horizon, the ADP data also suggests that the pace of job growth has been trending up in recent months.

After the expected rebound in employment in 2021 following the 2020 COVID Pandemic Panic, job growth slowed markedly especially in 2023 and 2024. The first few months of 2025 even showed some job loss. Since last summer, however, the ADP data has been charting consistent job growth, and larger monthly jobs numbers since earlier this year.

There is no denying that this is what the beginnings of a jobs recovery looks like.

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Manufacturing Job Growth…Yay!

As longtime readers are aware, the manufacturing sector is one to which I pay particular attention when assessing jobs numbers. Not only do manufacturing jobs generally pay more, but manufacturing employment is essential for President Trump to realize his Agenda 47 goal of making the United States a “manufacturing superpower.”

The past few years have not been kind for manufacturing. It is particularly good news, therefore, that the May report showed the first positive jobs print for manufacturing in two years.

Construction job growth continued, although it showed further cooling from April.

Among goods producing jobs, only Natural Resources and Mining showed job loss.

Among service providing jobs, only the Information sector showed job loss.

Professional and Business Services, Trade, Transportation, and Utilities, Healthcare, Finance, and Leisure all showed some level of job growth.

Not only did all but two sectors print job growth in May, but even sectors that have been shedding jobs in recent months are now picking up jobs. Information is the lone standout in this regard, as it had been showing job loss more often than not since the start of 2025.

Service providing jobs grew substantially more than goods producing jobs. Perhaps more significantly, service providing jobs have been on the upswing in recent months, even as goods producing job growth has cooled somewhat.

I have said before that sustained broad job growth was needed before we could say with confidence that the jobs recession has ended. The May ADP jobs report printed sustained broad job growth.

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Unemployment Trending Downward

When we look outside the ADP report to the weekly unemployment claims data, in both initial and continuing claims we are seeing a downward trend that points to steady improvement in the unemployment outlook.

We do need to apply some caveats to the unemployment data. Not only has the claims data moved up in recent weeks, but the longer-term unemployment picture from the BLS Employment Situation Summary is still showing rising joblessness dating back to mid-2023.

The ADP report is printing strong jobs growth and is clearly signalling a jobs recovery is underway, but that recovery is unquestionably in its early stages, and it is still extremely fragile. A negative jobs Employment Situation Summary report, or even an underperforming one, would be a serious challenge to a jobs recovery narrative.

The May Employment Situation Summary comes out on Friday. Whether the BLS data confirms or rebuts the ADP data will go a long way towards solidifying or weakening the case for a jobs recovery in this country.

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PMI Data Still Invites Skepticism

As noted the other day, the PMI data from the Institute for Supply Management is both a case for a jobs recovery and a case against it.

The case for is that both the Manufacturing PMI data and the Services PMI data have been printing expansion since the first of the year.

The case against is that both Manufacturing Employment and Services Employment have been printing contraction.

How can industry surveys be printing job growth on the one hand and employment contraction on the other? If we presume pristine data sets then the answer is clearly that they cannot—one data set or the other must be incorrect.

However, this is also where we have to remember that we do not have pristine data sets, and even ADP has in the past succumbed to the temptations of fudged Lou Costello Labor Math to present rosier metrics than were really warranted.

The ADP data may be highly inaccurate. The ISM PMI data may be highly inaccurate. Both data sets may be inaccurate to varying degrees.

If the job growth trends reported by ADP are real, then in due course we should expect to see the ISM PMI data on employment move into expansion territory. Similarly, if the Manufacturing and Services PMI metrics themselves continue to print expansion, we should expect to see that industry growth percolate down into employment growth.

The longer the PMI employment data shows contraction, the more we should be cautious about accepting the ADP jobs data at face value.

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The ADP Report Is A Strong Report

Despite the caveats and precautions, there is no denying that the ADP Employment Report is a strong jobs report. There is no denying that it is the latest in a string of increasingly stronger jobs reports.

On its own, the ADP data is signalling that a jobs recovery is starting to take hold in this country.

Will the BLS Employment Situation Summary due out on Friday show the same strong jobs numbers? Wall Street is guardedly optimistic, with a consensus projection of “only” 85,000 private sector jobs.

In March and April the projections were conservative, and the BLS job prints blew right past them. Will we see the same again for May?

That is, of course, the hope. Labor markets have languished in this country for far too long as it is, and a turnaround is absolutely overdue. A strong jobs report from the BLS, coming on the heels of a strong ADP report, with both reports the latest in a series of strong jobs reports, would be the strongest signal yet that a jobs recovery is finally taking hold in this country, and that it has been for the past few months.

We have more than a few reasons to believe that hope is not in vain. We still have a few reasons to remain somewhat skeptical.

Is a jobs recovery underway in this country? The ADP jobs report is the latest indication that it is.

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The number of job openings increased to 7.6 million in April, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and total separations decreased to 5.1 million and 5.0 million, respectively. Within separations, both quits (3.0 million) and layoffs and discharges (1.7 million) were little changed.

The 7.6 million job openings figure easily surpassed Wall Street’s projection as well as the Trading Economics forecast, both of which were 6.8 million.

The better than expected job openings number excited corporate media outlets, as it put the number of available job openings above the reported number of unemployed individuals.

Yet even just delving into to the levels of hires and separations, it is clear that the optimism corporate media infers from the job openings numbers does not extend very far. Employers and employees alike are still showing uncertainty about the current economic state of affairs.

Still, several sectors showed job growth in the JOLTS report, even when they reported job loss in the Employment Situation Summary.

Is the April JOLTS report a good jobs report? Maddeningly, the answer is ultimately “it depends”. For some sectors it is a good report. For others...not so much.

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Hiring And Separations Are Down

While the Bureau of Labor Statistics still found a way to inject its favorite jobs formulation of “little changed”, the devil in the detail is that overall hiring fell in April, with overall separations falling even more.

The corporate media assessment of these numbers is to impute a lack of overall confidence among both employers and employees.

The department’s Job Openings and Labor Turnover Survey (JOLTS) showed that layoffs fell but so did the number of Americans quitting their jobs - a sign of confidence in their prospects. And the report’s measure of gross hiring also dropped in April, suggesting that companies remain reluctant to add new workers even as they hold on to the ones they have.

Despite the apparent unease, employers presumably are also showing signs of optimism, given that reported job openings surged to a three-year high.

The jump in job openings certainly appears to be an optimistic signal, given that it pushed job openings above the number of unemployed.

The jump in openings put the available jobs above the total of unemployed workers. The rate of openings compared to the size of the labor force rose 0.4 percentage point to 4.6%.

As the top level data shows, however, the surge in job openings was met with a drop in overall net hiring.

Still, the net hiring trend among private employers was still positive, and following the same movements as the Employment Situation Summary’s All Employees data set.

While still positive on the month, indicating real job growth, that the net hiring data cooled in April is a subtle reminder that jobs markets in the US have quite a ways to go before a recovery can be said to be in full swing.

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Manufacturing Jobs Rose

One encouraging note within the jobs report is that net hiring rose in the manufacturing sector.

Manufacturing is one sector where the JOLTS data diverged from the Employment Situation Summary, which showed job loss in manufacturing for April.

Construction was another sector where the JOLTS data was markedly better than the ESS data.

Net hiring in construction strengthened in April, even though the ESS data showed job growth in construction cooling.

Trade, Transportation, and Utilities, a mainstay of service providing jobs, printed especially strong net hiring numbers.

Other service sectors showed net hiring cooling off, although professional and business services did show improvement over March, when net hiring was negative.

Leisure showed a marked cooling in net hiring, printing almost no job growth in April.

Healthcare, which has been the major source of jobs since the start of 2025, had the second weakest net hiring numbers over that time frame.

In what might be an encouraging note for the May ESS report due out on Friday, in most sectors net hiring outpaced job growth per the ESS, a notable shift from the March data.

While overall private-sector net hiring was in line with private-sector job growth from the ESS, the sector-level numbers invite greater skepticism and unease about what’s up next for US jobs markets.

Was the April JOLTS report a good report? It depends on the sector under scrutiny. Some had a good month, others had a less good month.

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ISM Data Invites Skepticism

The PMI data for April from the Institute of Supply Management provides further encouragement for skepticism.

The April Manufacturing PMI print showed Manufacturing continuing to expand in 2026.

The Services PMI print for April also showed expansion, although it also cooled for the second month in a row.

However, in contrast to the JOLTS net hiring data for Manufacturing, the ISM data showed Manufacturing employment contracted in April.

The ISM data has not shown manufacturing employment expanding since January of 2025, a trend which confirms that manufacturing employment has been shedding jobs for quite some time.

The ISM print also showed Services employment contracting, in marked contrast to the overall JOLTS data.

While the overall PMI data set is showing broad economic expansion, the PMI data does not show that expansion percolating through to increased employment.

How much actual job growth was there in April? Arguably, less than the government data sets are showing, and potentially none at all.

What is the state of jobs markets in the US? It depends on the report being examined, as well as the sector.

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No Obvious Energy Shock Impact

One encouraging aspect of the April JOLTS data is that it confirms that the energy shock from Iran’s illegal closure of the Strait of Hormuz and consequent disruption of global oil flows has not yet had any obvious effect on US jobs markets.

While the decline in both hiring and separations arguably shows a broad lack of confidence across jobs markets, the recent volatility in hiring and separations, as well as the longer term downward trend in both, indicates that jobs markets have been nothing if not skittish. Confidence is not a primary feature of US jobs markets at the moment, and has not been for quite some time.

Are jobs markets in the US improving? Broadly, the data shows that they are, although the improvement is uneven. However, some sectors, such as healthcare, may be showing signs of deterioration.

Certainly the JOLTS data gives a more optimistic portrayal of job growth for April, printing greater job growth in most sectors than than the ESS data. Whether that tells us anything about what sort of prior months’ revisions to expect on the upcoming May Employment Situation Summary remains to be seen.

Even though the JOLTS data shows uneven and somewhat problematic job growth, that events in the Middle East have not yet had a negative impact on US jobs markets augurs well for how well the US will be able to withstand the economic attritional battle currently being waged between the US and Iran.

As is the case in all attritional warfare, the longer the conflict goes before we start seeing the eventual signs of demand destruction, including broad based job loss, the better the US position is overall.

Against the backdrop of the war with Iran, is the JOLTS report for April a good jobs report? Arguably, yes.

Does the JOLTS data show the jobs recession in this country ending? Overall, the report certainly leans in that direction. If we continue to see sustained high levels of net hiring, especially if those levels are reflected in other jobs reports such as the Employment Situation Summary, then we definitely have to consider if the jobs recession is coming to an end.

The individual sector data is not quite as optimistic as the headline figures, however, and for that reason we should not leap to the conclusion that the jobs recession has completely ended. We can and should acknowledge that, for many sectors, there is confirmed job growth.

Whether one likes or dislikes the April JOLTS report ultimately comes down to the particular portion of the data one wishes to scrutinize.

Is the April JOLTS report a good report? It depends.

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From the preceding month, the PCE price index for April increased 0.4 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

From the same month one year ago, the PCE price index for April increased 3.8 percent. Excluding food and energy, the PCE price index increased 3.3 percent from one year ago.

There is no mystery as to why inflation has returned: the United States, like the rest of the world, is experiencing an energy price shock as a result of Iran’s illegal closure of the Strait of Hormuz as part of the war between the US and Iran.

What is remarkable is that, somewhat contrary to expectations, the impacts of that energy price shock have not extended beyond energy prices into other goods and services, despite the rise in a variety of commodities prices and inputs.

Energy price inflation pushed the headline PCEPI number higher year on year, yet month on month consumer price inflation eased at the headline level, at the core level less food and energy, and for energy prices themselves.

One result of this fairly muted response to the continuing war with Iran was that Wall Street was able to project April’s PCEPI inflation numbers almost exactly.

That the inflation numbers were fairly easy to project is confirmed by the Cleveland Fed’s inflation nowcast projecting April’s numbers with the same accuracy.

Despite the ongoing war with Iran, the PCE Price Index, the Federal Reserve’s favorite consumer price inflation gauge, showed inflation cooling month on month, resulting in a slower increase year on year.

Despite the ongoing war with Iran, consumer price inflation per the PCE Price Index is more of the same in April that printed in March.

If the Strait of Hormuz remains closed, that will not remain the case indefinitely. Cost pressures are building in the economy, and at some point we will see broader price increases for more than just energy prices.

We are not seeing them yet.

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Little Room For Corporate Media Hype

The April PCE inflation data ironically gave corporate media little with which to spin their typically anti-Trump narratives. While corporate media headlines snarked about inflation rising at its fastest pace in three years, the buried lede was that April’s rise was less than March’s.

Economists polled by Reuters had forecast PCE inflation increasing 3.8% year-on-year. The PCE price index rose 0.4% month-on-month in April after shooting up 0.7% in March.

The nuance—ignored by corporate media—is the impact of cooler month on month inflation numbers.

A cooler month on month metric means that inflation’s rise year on year slowed in April rather than rose.

We should not pretend that April’s cooling indicators mean the worst of the price shock in energy is necessarily behind us. Consumer price inflation is still here, and the year on year numbers are higher than late summer in 2023.

We should, however, acknowledge that inflation has yet to heat up as it might, should the standoff between the US and Iran in the Persian Gulf persist.

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Energy Price Inflation Eased On Stabilizing Oil Prices

The elevated inflation metrics for April tell us that prices are indeed higher, with energy prices leading the way month on month, with April’s percent increase less than half of March.

The reality is that energy prices overall were showing signs of stability, albeit at a higher level than before the war with Iran.

Oil prices had actually been inching downward in the first part of April, before rising at the end of the month.

The price stability of early April helped move market prices for gasoline and diesel lower, with the increases not emerging until the last week or so.

Even the EIA’s retail price data for gasoline and diesel fuel showed stability during April.

The stabilization trend was confirmed by private reporting of retail gas prices.

There is an important distinction to be made between prices that are high and prices that are getting higher. For most of April, energy prices, and fuel prices in particular, were high but did not go higher until the end of the month.

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Food Price Surge

The one clear inflation pain point for April was the surge in food price inflation.

However, the month on month surge, while the highest since President Trump took office in January 2025, did not translate into a notable year on year increase.

Food prices rose significantly in April, but even so the longer trend is still one of stability. While current stability is no indicator of future pricing, it once again leaves us at the point of “not yet” when considering the worst case ramifications from the energy price shock which began in March.

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Goods And Services Eased

The clear sign that the energy price shock has yet to move beyond energy prices was the significant cooling of non-durable goods price inflation.

Even though durable goods prices ticked up in April, non-durable goods declined, and were joined by service prices.

Year on year, non-durable goods increased again, after being the only core category to surge dramatically in March.

Durable goods, which had been rising since well before the war with Iran began, changed little year on year.

Most significantly, month on month inflation for energy goods and services greatly outpaced nondurable goods and services.

Within the US, the energy price shock has been contained to energy prices.

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It Can’t Last

While energy price inflation is a significant discomfort to people, especially as it translates into retail gasoline prices, that the surge in energy prices has not translated into higher prices for other goods and services, broadly speaking, is itself noteworthy.

It is particularly noteworthy because, unless there is a peace deal struck between the US and Iran that reopens the Strait of Hormuz to shipping, that can’t last.

Globally, closing the Strait already means that stagflation is stalking the world’s economies.

Not only are energy prices up, globally, but key industrial commodities are rising as well.

Copper reversed its price decline towards the end of March and is continuing to rise.

Tin showed a similar trend towards increase beginning in late March.

Molybdenum has shown far less volatility, but it also has move sharply higher.

We will have to wait until the May data for both the Consumer Price Index and the Producer Price Index come out to see how much these non-oil manufacturing inputs are contributing to consumer price inflation within the United States.

We do not need to wait to see that these are real cost pressures. Commodities are industrial inputs, as a rule, which is to say that an increase in the price of various commodities is an inescapable increase in the cost of producing a variety of goods and services.

While manufacturers may opt to absorb those cost increases before passing them on to consumers, that will only last so far. If the inflationary price trends among various commodities continues, those cost pressures will result in consumer price inflation for a variety of durable and non-durable goods.

The energy price shock is for now limited to energy prices. That will not last indefinitely. It can’t last indefinitely.

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More Of The Same Inflation…For Now

With the war with Iran ramping up at the end of February, my assessment of the February PCE data was that is was the end of “more of the same”. For pre-war prices, that was absolutely true.

Ironically, the April PCE data has been largely a repeat of the March data. Once again, we have “more of the same” inflation, but with an energy price shock in the mix.

We have energy price inflation, and that is creating headline consumer price inflation within the PCE data just as it did within the CPI data. We also have food price inflation.

Beyond that, we are not yet seeing much in the way of new inflation pressures.

With rising commodities prices, it is only a matter of time before those trends translate into higher consumer prices. It may very well prove to be the case that May will be the month we see the energy price shock from Iran’s illegal closure of the Strait of Hormuz translate into a true stagflation phenomenon.

Globally, we are already seeing supply constraints for oil, for natural gas, and for a variety of industrial input commodities. Stagflation occurs when supply constraints push prices higher, particularly when it happens on top of a weak, underperforming economy. Iran’s lawlessness has provided the global economy with the supply constraints necessary to catalyze stagflation globally, and it is only a matter of time before those supply constraints begin to impact the US economy.

The April PCE data is hardly good news as far as inflation is concerned. 3.8% inflation is a sharp reversal from where inflation was just two months ago.

Yet the April PCE data does offer one significant bit of comfort: It is, in most respects, a milder repeat of the March data.

The April PCE data is more of the same war-inflected consumer price inflation data. We will not see “more of the same” indefinitely. We may see an end to “more of the same” in a few weeks with the May inflation data.

Consumer price inflation has indisputably risen, and risen by a lot. Energy prices have increased by as much as 50%, and fuel prices by even more than that.

Yet the stagflation shoe has not really dropped for the US economy—not yet. If the standoff in the Persian Gulf continues, or if hostilities are resumed, that shoe will drop, but for now we have the paradoxical “comfort” of “only” having to contend with energy price inflation.

The April PCE data is not at all good news. It is, however, a far cry from the worse news that we will soon be seeing if there is not an outbreak of peace between the US and Iran.

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Yet oil prices are not rising, as Wall Street seems largely convinced that the Strait of Hormuz will be reopened literally any day now. Iran and the US will come to terms, the Strait will reopen, and everything will revert back to the way it was before the start of Operation Epic Fury.

At least one investment bank, however, is ditching the hopium, presumably for a more sober and judicious assessment on the Middle East. In that assessment, the Strait of Hormuz stays closed for at least now, which will eventually push oil prices to new highs.

“We think the Strait of Hormuz remains largely closed for months yet, meaning shortages become more urgent and oil hits new highs this Summer,” according to a recent note from the investment bank’s energy and macro teams.

While the implications on oil prices of a prolonged closure of the Strait are both obvious and closely followed, what gets lost in the focus on energy products are the efforts Arab nations in the Persian Gulf have made to diversify their economies. Oil flows are disrupted, but much more flows through the Strait than just oil.

Even more economic output depends on access to oil from the Persian Gulf.

As the standoff between the United States and Iran continues, and with the US rejecting Tehran’s latest “draft Memorandum of Understanding,” a reality of rising commodities prices and constrained supplies is settling over the global economy.

Stagflation is stalking the global economy. Demand destruction must follow, but how much will be needed to restore balance?

The Strait Of Hormuz Is Closed For Business

Make no mistake: no shipping has transited the Strait of Hormuz since right after the start of Operation Epic Fury. All publicly available shipping data points to the same conclusion: the war between the US and Iran has slammed the door shut on Persian Gulf shipping.

Data released between 11-13 May 2026 indicates that commercial traffic through the Strait of Hormuz remains far below pre-war levels, as measured by vessel tracking and trade data cited by the Center for Strategic and International Studies. Daily tanker and cargo ship transits remain far below those recorded prior to the United States/Israel offensive on Iran in November 2018. While some vessels may operate with automatic identification system signals switched off, publicly available traffic data show no broad recovery in flows.

The collapse of cargo traffic through the Strait was immediate and complete, as confirmed by IMF Portwatch shipping data.

The near total collapse in tanker traffic also confirms that the US Navy blockade of Iranian shipping is also having an effect. With next to no tankers transiting the Strait, Iran’s closure of the Strait means Iran is also not shipping any oil.

Yet dry bulk cargo vessels, of which quite a few had been moving through the Strait before the war, have also ceased to transit the international waterway.

The Strait of Hormuz is closed. It does not matter what sort of ship one considers; all classes of cargo vessel are denied transit passage through the Strait.

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Oil Prices Are Stable…For Now

Despite the closure of the Strait and the denial of Persian Gulf oil flows to the global economy, energy prices have broadly stabilized and even been trending down recently, as markets respond ever hopefully to the latest news reports on the peace talks between Iran and the US.

While stabilizing prices are, on the face of it, a good thing, what is not good is that the stability (such as it is) comes when oil prices are more than 40% above pre-war levels.

That stability, however, is somewhat illusory, as it comes as countries are releasing large amounts of their strategic oil reserves to buffer the oil supply shock that began when the Strait of Hormuz was closed.

The United States has released much of the oil recently added to the Strategic Petroleum Reserve over the past thirty-two months.

Notably, US commercial stocks, while having been drawn down, are still within the same broad range as they have been. While the releases from the SPR are significant, the SPR itself is far from the only oil inventory the United States can access on demand.

Separately, the IEA responded to the first announcements of the Strait’s closure by coordinating among its 32 member nations a release of some 400 million barrels of oil from reserves—one-third of physical reserves, and nearly one-fourth of total oil reserves.

IEA members hold emergency stockpiles of over 1.2 billion barrels, with a further 600 million barrels of industry stocks held under government obligation. The coordinated stock release is the sixth in the history of the IEA, which was created in 1974. Previous collective actions were taken in 1991, 2005, 2011, and twice in 2022.

There is a limit to how much buffering is possible with releases from strategic oil stockpiles, however. Oil reserves might be large by nearly every standard imaginable, but they are finite. The lower oil reserves get the less buffering is feasible, and the greater the inflationary pressure on oil prices.

Already, energy analysts are growing wary of how much longer strategic reserve releases can contain oil prices.

The message from this week’s SPR and commercial inventory data could not have been clearer. Combined crude inventories fell by 17.8 million barrels, the largest drawdown since records began in 1982. In effect, Washington is buying time. The administration appears to be using strategic reserves as a temporary liquidity bridge while diplomats attempt to engineer some form of stabilization with Tehran before the physical market begins forcing a much harsher adjustment through price.

The longer the Strait is closed, the closer oil markets get to the point where the buffering of strategic oil releases breaks down, at which point oil prices move sharply higher.

We have already had one oil price and supply shock. If this war continues long enough, we will have another one, and almost certainly it will be a greater one.

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Aluminum, The “Other” Middle East Export

While oil somewhat understandably grabs the economic headlines regarding the war between the US and Iran, the disruption of another commodity is creating its own economic turmoil: aluminum.

As countries such as the United Arab Emirates and Qatar have sought to diversify their economies, one industry they have moved into in a big way has been aluminum smelting.

Three of the top 15 aluminum exporting countries in the world are now situated in the Persian Gulf.

1. Russia: US$9.6 billion (12.3% of total aluminum exports)

2. United Arab Emirates: $7.8 billion (9.9%)

3. Canada: $7.5 billion (9.5%)

4. Malaysia: $5 billion (6.3%)

5. India: $4.2 billion (5.3%)

6. Norway: $4.16 billion (5.3%)

7. Australia: $4.07 billion (5.2%)

8. Bahrain: $3.5 billion (4.5%)

9. Netherlands: $2.7 billion (3.5%)

10. Iceland: $2.2 billion (2.8%)

11. Qatar: $1.93 billion (2.5%)

12. Italy: $1.86 billion (2.4%)

13. South Africa: $1.78 billion (2.3%)

14. Indonesia: $1.6 billion (2%)

15. mainland China: $1.56 billion (2%)

Taken together, the Arab countries of the Persian Gulf account for roughly 9% of global aluminum supply, all of which is bottled up in the Persian Gulf, courtesy of the IRGC.

While oil prices have moved down in recent days, aluminum prices have risen steadily since the war began, even as oil prices have not.

The catalyst for the price increases is not hard to fathom: the outbreak of war almost immediately impacted aluminum production in the Middle East.

The closure of the strait has already forced some smelters to curtail operations. Qatar’s Qatalum said on March 12 it would reduce production by about 40%, while Aluminium Bahrain said it was shutting down about a fifth of its capacity on March 15. Industry executives have warned that if the strait remains closed, further production cuts will be unavoidable — potentially pushing prices above the 2022 record.

While China has sought to leverage the supply disruptions in aluminum with increased production, markets are now becoming fearful that even China may about to trim aluminum production, pushing prices even higher.

Chinese authorities are now moving to rein in that over-production as inventories swell. A smelter in Baise, Guangxi province, has already cut output of molten aluminum, Mysteel wrote, without providing estimates of volumes affected. The steel and oil refining industries will also be targeted, the Ministry of Industry and Information Technology said in a statement on May 13.

The behavior of aluminum prices tells us what will happen to oil prices should the buffer of strategic reserve releases become exhausted. There is no strategic reserve of aluminum, and so wartime disruption of Middle East production has resulted in a steady and ongoing rise in aluminum prices. When supply is constrained and not buffered, when scarcity is artificially introduced into the market, prices of anything will rise accordingly, without fail.

The behavior of aluminum prices today is what the behavior of oil prices will be tomorrow. If the buffering effect of strategic reserve releases ends, oil prices will rise sharply. Of that there can be no doubt.

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Other Commodities Are Also Rising

Last month I explored how the war with Iran was putting stagflationary pressures on China.

Not the least of these pressures were because of sharp price increases in industrial materials such as sulfur, bitumen, styrene, and polyethyline.

Meanwhile, other commodities prices, such as copper, tin, and molybdenum, are also showing inflationary pressures since the war began.

In a quirky reminder that inflation and stagflation are also price distortions, a few commodities such as palladium and rhodium are showing price reductions since the war began.

Perhaps most ominously for global food security, grain prices such as for wheat and rice are also moving upward.

One important caveat regarding food prices: prices for wheat and rice started rising well before the start of Operation Epic Fury. Although the war with Iran has certainly not helped matters, food price inflation is one area that we cannot put all the blame on Iran’s illegal closure of the Strait of Hormuz.

With staples such as wheat and rice becoming more expensive over time, food price inflation is a foregone conclusion, with a corresponding rise in food insecurity not far behind.

More broadly, inflation, instability, and volatility are creeping into a broad swath of commodities markets. Commodities themselves are invariably inputs into other production processes, making rising commodities prices rising costs—something we have seen reflected in rising US PPI for Intermediate Demand.

While US consumer price inflation has not yet shown significant increases outside of energy related products, one does not need a PhD in economics to grasp that continued price pressures in the production process will eventually translate into increased prices for consumer goods of all kinds. As production costs rise, as factory gate inflation continues to arise, particularly for intermediate demand (which shows the inflation’s impact on manufacturing supply chains), there is no place for those cost increases to go but into consumer prices. We may not be seeing broad consumer price inflation yet as a result of the war’s price and supply shocks, but it surely is only a matter of time before we will.

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Multiple Shocks

The economic impact of the war with Iran is naturally most visible in its impact on oil prices. Oil is the most significant and most visible export from the Persian Gulf, as well as the one with the most volatile pricing.

Yet Iran’s illegal closure of the Strait of Hormuz was from the outset completely indiscriminate. Iran blocked all shipping, not just oil tankers. The disruption in oil flows was also the disruption in aluminum flows as well. If a good moved through the Strait of Hormuz, Iran disrupted that movement.

Energy prices also play into smelting and refining metals such as copper, tin, and molybdenum. The price shock in oil has only increased inflationary pressures on those commodities. As oil prices reach the end of near term stabilization when strategic reserve releases are trimmed back, the secondary price shock in oil will almost certainly push commodities with high energy footprints even higher.

From the one price and supply shock in oil comes multiple other price shocks in various industrial commodities. The price and supply shock in oil is also not helping ward off rising food prices. The disruption of other Persian Gulf exports such as aluminum merely adds to global economic stress.

We are already seeing the impact of these price shocks in producer prices, both here in the US and in China. The limits of petroleum reserves tells us that, unless there is a peace deal brokered soon to reopen the Strait of Hormuz, we will soon see more price shocks.

There is no escaping the reality that these price shocks are what triggers stagflation. Stagflation is what arises when there is a sudden drop in available supply, and the global economy is seeing reduction in supply across an increasing range of commodities and production inputs.

When supply drops in this fashion, the only way back to any sort of pricing equilibrium is for demand to drop in order to match supply. Once stagflation takes a big enough bite out of an economy, demand destruction is the next inevitable step. That is the other shoe that must eventually drop and land on the global economy.

Stagflation is already here. Barring a quick end to the war with Iran, demand destruction and recession will soon follow. Demand destruction must happen—people and businesses must eventually buy less and consume less. There are no economic alternatives. Either supply is restored or demand must be destroyed.

The only question as yet unanswered is how much demand destruction will we endure while the world’s economies rebalance themselves?

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As DNC Chair Ken Martin belatedly admitted when releasing the report, the document was an even bigger dumpster fire than the Democrats’ efforts in 2024.

Martin issued the following statement to CNN:

“When I was elected DNC chair, I commissioned an after action review of the 2024 election that I wanted to be honest and transparent, and with actionable and specific takeaways for the future of the Democratic Party. When I received the report late last year, it wasn’t ready for primetime — not even close — and because no source material was provided, it would have meant starting over. I could not in good faith put the DNC’s stamp of approval on the report that was produced.”

“After last November’s massive Democratic wins, I didn’t want to create a distraction, but by not putting the report out, I ended up creating an even bigger distraction. For that, I sincerely apologize. For full transparency, I am releasing the report as we received it, in its entirety, unedited and unabridged. It does not meet my standards, and it won’t meet your standards, but I am doing this because people need to be able to trust the Democratic Party and trust our word.”

I’ve read the report. Martin is being kind. The polite way to describe the report is that it is pure garbage.

The report is incomplete. Whole sections, such as the Executive Summary, are missing entirely. Sourcing and attribution are nonexistent. Some of the asserted facts are of questionable accuracy or simply wrong. I would call the report “amateurish” but that would be an insult to amateurs everywhere.

The structural defects of the report itself negate any informational value it might have. Its presentment of factual assertions and the conclusions it draws from those factual assertions are fatally tainted by the gaps in the reports assemblage.

As an analysis of the Democrats 2024 campaign efforts, the report is worthless.

Why mention the report, if it is as bad as all that? The report is as bad as all that, but it warrants mentioning because of the utter absurdity that it was even necessary. Everything about the Democrats 2024 implosion was reported and documented in 2024. All the leg work for a real introspection into 2024 has already been done.

It was known long before Kamala Harris acceded to the nomination that she was a flawed candidate with ample baggage of her own.

It was known long before the disastrous June 27th debate that Joe Biden’s cognitive decline would be a factor in the election.

It was known almost from the outset that Kamala Harris’ campaign had a problem with messaging.

It was known as the election cycle drew to a close that Kamala Harris’ campaign was not capable of making smart, sensible, strategic decisions.

It was clear from the polls leading up to the election that Democrats were bleeding support among core constituencies.

The autopsy report itself ultimately is irrelevant because everything it purports to discuss was already known. Nothing was revealed in the report because there was nothing left to reveal.

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February 2024: Biden’s Cognitive Impairment Confirmed

The warning signs that a Kamala Harris campaign would be a problematic effort at best emerged very early in 2024, after Special Counsel Robert Hur declined to prosecute Joe Biden for mishandling classified documents due to his age and apparent failing memory.

Specifically, Hur described Biden in his Special Counsel report as an “elderly man with a poor memory.”

Despite the obvious challenge to Biden’s fitness to serve a second term, there was no serious effort to promote Kamala Harris to the top spot at the time.

It is worthwhile to point out that, as the Robert Hur report was gaining traction in corporate media, Kamala Harris was faring worse in the polls than Joe Biden. Even among Democrats, a senile Joe Biden was provably viewed as preferable to Kamala Harris at the top of the ticket.

This was in February, 2024. The Democrats were faced with a clear problem about Joe Biden’s fitness to run for a second term and still concluded that Biden was a better choice than Kamala Harris.

You do not need an “autopsy” report to understand this. You only need to read the media reporting at that time.

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June 27, 2024: The Wheels Come Off The Biden Campaign

The end of June and the beginning of July, 2024, were days when months happened for the Democrats. There was, of course, Joe Biden’s disastrous performance in the June 27 debate against Donald Trump, where the extent of his cognitive decline was broadcast in prime time for the nation to see.

As Bari Weiss (then of The Free Press, before taking the helm at CBS) reported the day after, not only did the debate reveal the extent of Biden’s mental deterioration, it revealed the mendacity and complicity of corporate media in concealing it from the public. Corporate media was exposed as being little more than the propaganda department of the Democratic Party.

The Free Press

Bari Weiss: They Knew

Rarely are so many lies dispelled in a single moment. Rarely are so many people exposed as liars and sycophants. Last night’s debate was a watershed on both counts…

Read more

2 years ago · 3032 likes · 2142 comments · Bari Weiss

When Jake Tapper and Alex Thompson released their “tell-all” Original Sin in 2025, in meandering, evasive, and largely self-serving terms, they essentially admitted that Bari Weiss was right.

As disastrous as the debate performance was, however, it was arguably not the worst thing to happen to the Democrats at that point. A few days after that debate, the Supreme Court effectively demolished Special Counsel Jack Smith’s “J6” case against Donald Trump, acknowledging that Presidents cannot be indicted for performing their official duties.

Not only did Smith’s lawfare campaign against Trump get eviscerated, that ruling also put on pause the sentencing phase of Manhattan District Attorney Alvin Bragg’s “hush money” case.

The collapse of the lawfare cases against Donald Trump meant that there would be no avoiding further debates between Biden and Trump, and no way to shield Biden from further scrutiny over his increasingly questionable cognitive abilities.

Despite the rapid implosion of Biden’s re-election bid, Democrats even in early July still did not coalesce behind Kamala Harris.

Instead, there was aborted talk of having a “blitz primary” so Democrat voters could choose a suitable replacement for Joe Biden.

Their idea goes something like this, according to a memo shared with Semafor that has been circulated to Democratic donors and bundlers as well as officials within the Biden campaign and administration:

• Biden would step down as the Democratic nominee in mid-July, and announce the new system, with backing from Vice President Kamala Harris.

• Potential candidates would have a few days to throw their respective hats in the ring. The Democratic Party then would begin a primary sprint in which the six candidates who receive the most votes from delegates pledge to run positive-only campaigns in the month leading up to the convention.

• The “blitz primary” would involve weekly forums with each candidate moderated by cultural icons (Michelle Obama, Oprah, and Taylor Swift are among the names floated in the memo) in order to engage voters.

• The nominee would ultimately be chosen by the delegates using ranked choice voting before the start of the Chicago convention on Aug. 19.

• It would be announced with plenty of fanfare on the third day of the gathering. The memo imagines the nominee unveiled on stage with Biden, Barack Obama and Bill Clinton.

Even as it was glaringly apparent that Joe Biden was not going to be the Democratic nominee come the fall campaign, Democrat strategists and party leaders were not leaning towards Kamala Harris at all.

Let that sink in: Joe Biden’s campaign was imploding and all but over, and Democrats wanted anyone other than Kamala Harris to step in as the nominee.

Do we really need an autopsy report to conclude that Kamala Harris had a lethal amount of political baggage, when her own party did not want her to be the nominee?

Nor should we overlook how she came to be the nominee. Roughly thirty minutes after Biden posted to social media his letter withdrawing from the race, he made another social media post explicitly endorsing Kamala Harris as his heir apparent.

If one believes the (very credible) narratives that Biden was forced out, his last-minute endorsement of Harris might actually be the biggest “F*** You” in modern political history. At the very least, Biden short-circuited the previously discussed plans and machinations of the Democratic Party to pick someone other than Kamala Harris.

Do we really need an autopsy report to conclude that the Democratic Party had a major breakdown in party communications and strategy to be blindsided in this fashion? Bear in mind that up to that moment, the Democrats had their eye on anyone except Kamala Harris.

The party did not want Kamala Harris as their candidate—and this had been publicly reported throughout the first half of 2024. Yet, because of how Biden’s withdrawal was handled, the part found itself with Kamala Harris as their candidate.

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Human Trafficking

With Harris having moved into the nominee slot by the back door, her political baggage quickly became one of many albatrosses around her neck.

In particular, the debacle that had been Kamala Harris’ tenure as one of Biden’s “border czars” very quickly became an early target for Trump surrogates and alternative media outlets.

That part of her political resume was particularly damaging, as it brought back into the spotlight the very disturbing revelations I had discussed earlier in 2024, that roughly 85,000 children had been trafficked across the southern border, with at least the facilitation if not the outright complicity of the Biden Administration.

Nor should we overlook Tulsi Gabbard, among others, being targeted with Stasi-like surveillance under a reinvigorated “Quiet Skies” program run by the TSA.

Stories such as this gained traction particularly within alternative media outlets, even as they served to discredit corporate media outlets, which were again shown in the process to be fully complicit in the Biden White House campaign of censorship and repression.

The human trafficking angle would also get worse as the summer progressed, as media outlets reported that the number of children (“unaccompanied minors” in the anodyne argot of DHS) that were either trafficked or simply “lost” (and therefore almost certainly trafficked) was not 85,000 but at least 320,000.

The resulting narrative was not at all kind to Kamala Harris. The extant public record was showing the Administration—which is to say, Kamala Harris—effectively involved in child trafficking.

The Biden-Harris Administration is not properly vetting sponsors, and has not been properly vetting them. Whistleblowers report that this lack of vetting has gone on almost since the beginning of the Biden-Harris Administration.

Because the Biden-Harris Administration is not doing proper vetting, children are being released not into the custody of family or friends—people who would provide proper care. Because the Biden-Harris Administration is not doing proper vetting, children are being released into the custody of likely human traffickers.

To put it bluntly, the Biden-Harris Administration has been releasing hundreds of thousands of children into slavery.

To put it bluntly, Kamala Harris has been releasing hundreds of thousands of children into slavery.

Do we really need an autopsy report to recognize that a candidate who has to explain away such charges faces an uphill battle to secure a majority of voters in any state?

Again, the broad outlines of all of this were publicly reported and well known long before Biden stepped aside and thrust Harris into the spotlight. That the media attention only made the numbers worse serves to underscore just how deeply flawed Kamala Harris was the Democratic nominee. There were good reasons the Democrats did not want her to step into Biden’s shoes.

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Polling Revealed A Shambolic And Losing Campaign

By mid October, the public polling by Atlas Intel and others made it clear that Harris’ candidacy was in serious trouble.

The Atlas Intel polls in particular showed two very disturbing trends for Kamala Harris: 1) third party candidates like Cornell West and Jill Stein pulled more support away from her than from Donald Trump, making Harris vulnerable on both the right and the left. 2) A growing portion of the voter coalition Joe Biden assembled in 2020 was defecting to climb aboard the Trump Train.

Nor was there any great mystery why voters were turning away from the Harris campaign—the campaign itself sucked.

First there was her stance on “price gouging”, which carried uncomfortable parallels to Richard Nixon’s infamous 1971 attempt at price controls.

Nor did she just stop there. When she did discuss her economic plans, they included a heavy dose of Nixonomics, including rent control, while doing nothing to address the harsh reality that the 2022 hyperinflation cycle had resulted in a major loss of real income across all job sectors and income brackets.

Full disclosure: I was opposed to Harris’ economic proposals then and I still think that rent controls, price controls, and ignorance about declining real wages are a very bad policy mix.

However, the polling data made it clear that I was not alone in rejecting Harris’ economic vision in favor of Trump’s. Voters in 2024 had a bad feeling about the state of the US economy and that bad feeling was leading an increasing number of voters to support Donald Trump.

That is what the national poll data showed at the time.

The Pennsylvania poll data also showed that Donald Trump had surprising traction among groups that one would expect to be firmly in the Democratic camp, such as blacks, women, and “non-binary” voters.

The poll data also showed that Trump was doing better among the lower income brackets, while Harris fared well only among those earning $100,000 per year or more.

The Wisconsin poll data from that same period showed that Trump’s numbers were no fluke.

The poll data was clear and unequivocal: On the issues of greatest significance to voters, Kamala Harris’ messaging was either rejected or ignored. People either did not like or did not trust her economic proposals, and they gravitated to Donald Trump’s proposals, with Trump making significant inroads into traditionally Democrat demographics as a result.

Harris’ disastrous poll numbers in swing states also served to highlight the chaotic and profligate nature of her campaign itself, such as when her staffers hyped an appearance by Beyoncé at a Houston rally late in the campaign cycle, leading supporters to expect a mini-concert by the musical superstar, only to have her talk briefly and depart without singing a note.

That Harris was even bothering to campaign in Texas in late October, when it was clear she had zero chance of carrying the state, rather than the much more vital “swing” states such as Pennsylvania and Wisconsin, was itself a bizarre choice by the campaign. Capping that questionable logic with an apparent “bait-and-switch” with a major celebrity gave the campaign a shambolic yet cynical appearance. Such decisions certainly gave alternative media outlets yet another chance to portray Kamala Harris has cynical, contemptuous of voters, and utterly clueless about the struggles ordinary American are facing.

The consequences of such disastrous decision-making was revealed in the poll data well before Election Day. Every shift in core Democrat constituencies away from Harris and towards Trump was another confirmation that Harris’ campaign was an absolute hot mess of chaos and corruption.

Does it really take an autopsy report to discuss what was already public knowledge?

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The Autopsy Was A Mess. It Was Also Unnecessary

There was simply never any need for an autopsy report. Everyone watched the Democratic Party collapse in the Presidential contest in 2024. People already know why the Democrats lost. If the Democrats have any grasp on reality left, they know why they lost.

The brutal reality for Democrats is that the 2024 Presidential election contest saw the Democrats implode on every front.

The brutal reality for Democrats is that, in the 2024 Presidential election contest, America saw the Democrats implode on every front.

The brutal reality for Democrats is that, in the 2024 Presidential election contest, even corporate media reported that the Democrats were imploding on every front.

It was plain in early 2024 that the party had guessed wrong in letting Biden press forward with a re-election bid.

It was plain in early 2024 that Kamala Harris was the absolute last choice the Democrats had for an alternative to Joe Biden. Right up until Joe Biden made the it untenable, the Democrats made the judgement call that they would do better with a senile Joe Biden than with Kamala Harris.

It was plain that corporate media was completely in the tank for Joe Biden, and then for Kamala Harris, effectively telling voters not to believe their own eyes—and corporate media luminaries such as Jake Tapper admitted as much after the fact.

It was plain as Joe Biden’s campaign went off the rails after that disastrous debate that Kamala Harris’ baggage would not be easily offloaded. Her failures as border czar, the humanitarian nightmares created at the southern border by the policies of the Biden-Harris Administration, policies she effectively inherited having been Vice-President during their implementation, and the authoritarian abuses of the Biden White House against political opponents all were political deadweight weighing her campaign down.

It was plain as the election cycle wore on that Kamala Harris had either the wrong message or was ineffective at delivering the message (or both). She did not connect with voters on any of the issues that were of importance to the voters. She did not make a compelling case for the Democrats’ ideas on the economy, on immigration, on inflation, or on protecting “democracy” and civil liberties.

It was plain from the Beyoncé fiasco that Harris’ campaign was making horrible strategic and tactical decisions about where to campaign and where to direct campaign dollars.

The lunacy of the Democratic Party’s 2024 autopsy report is not that it is an inept, amateurish, incomplete pile of excrement (although it is). The lunacy is that the Democratic Party thought it needed to commission such a study to understand why the 2024 election turned out the way that it did, when the entire country had already witnessed the party’s election machinery completely disintegrate over the course of the election cycle.

There is no mystery as to why the Democrats came up short in 2024. The reasons why were amply documented and discussed during the election cycle itself. The only mystery now is how much longer can the Democrats remain in denial about 2024.

If the autopsy report is any indication, they will remain in denial for quite some time yet.

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1

For those who are interested, the complete DNC draft report, with annotations.

Democratic Party 2024 Autopsy Report

10.1MB ∙ PDF file

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It is noteworthy that his defeat had reverberations far beyond the Kentucky Fourth Congressional District, with a number of notable voices here on Substack arguing passionately for his re-election. Several sought to use their publications to help mobilize support on his behalf.

For them, Massie’s re-election was of almost existential importance.

At the same time, several alternative media outlets were quite opposed to his re-election. John Nolte, Senior Editor at Breitbart, was positively celebratory about his defeat.

While it’s glorious that this self-regarding narcissist lost, even more glorious is that he got himself humiliated by a ten-point margin — ten points — 55 to 45 percent, with 99 percent of the vote counted.

President Trump was dead set against Massie’s re-election, urging Kentucky to elect Massie’s opponent, Ed Gallrein, as the GOP standard bearer in this year’s mid-term elections.

To say that Thomas Massie provokes a wide range of responses is an understatement!

Full disclosure: I am no fan of Thomas Massie, as readers and followers can attest. When I have had occasion to mention him on Substack Notes, I have generally derogated him as “Cranky Thomas Massie”, a snarky play on his social media handle “Classy Thomas Massie.”

Yet was his defeat truly so surprising?

Why would Republican voters in his district turn on him after having elected him to Congress for seven consecutive terms?

One possible reason might have been that Massie was a demonstrably poor legislator. A search of Congressional records shows that not one single bill he introduced ever became law. In fact, Massie gained more notoriety for his tendency to vote “no” on all sorts of legislation, so much so that corporate media dubbed him “Mr. No.”

It was his penchant for casting “no” votes that earned him President Trump’s enmity. Last year Massie was one of two Republican congressmen to vote against President Trump’s “One Big Beautiful Bill” omnibus spending package. Massie was a reliably contrarian vote opposing many of Trump’s initiatives and tax cuts.

Was Massie “wrong” for voting against the President’s agenda so often? As with so many political questions, that’s debatable. I certainly cannot fault Massie for voting against the One Big Beautiful Bill, given that I described it at the time of its passage as “One Big Ugly Failure.”

Yet while votes against legislative behemoths such as the One Big Beautiful Bill might have some political and ideological justification, many of Massie’s “no” votes could be seen as frivolous and event cantankerous. Perhaps most notably, in 2022 he voted against a non-binding House Resolution condemning rising antisemitism in the United States. His stated rationale on X at the time was that the resolution “promoted censorship”.

That explanation, offered without any substantiation, is extremely thin gruel, as the text of the resolution does not argue for any new restrictions on speech, but merely declares that the House of Representatives is as a body opposed to antisemitic speech.

The paucity of his explanations and ideological defenses for even his own pet pieces of legislation highlights another of Thomas Massie’s legislative weaknesses: a conspicuous lack of advocacy for his own legislative agenda (to the extent he even had one). The most notable example of this is his curious failure to build out a political argument for his perennial one-sentence bill to eliminate the Department of Education. While Massie would say simply that the Department of Education was unconstitutional, you will not find any op-ed articles or other long-form writings arguing the how and why of the Department of Education’s unconstitutionality.

In yet another bit of irony, when Massie resubmitted the bill in 2023, I did explore the ins and outs of the Department of Education’s inefficacy and unconstitutionality.

The bill to eliminate the Department of Education was legislation I supported, and for all the same reasons Thomas Massie articulated. Yet the reality is that my own article in support of Massie’s bill was a far more comprehensive attempt to lay a Constitutional foundation for dismantling the Department than anything Massie himself ever put forward.

That lack of ideological illumination for a piece of proposed legislation indisputably important to Thomas Massie revealed a lack of political or ideological depth on his part. The relative shallowness of his convictions arguably is what led to such cringeworthy postings on X such as this one challenging the legitimacy of Joe Biden’s “ghost gun” regulations.

While Massie was broadly correct on the particular Constitutional merits of Biden’s proposed “ghost gun” regulations, the argument he made was simply absurd, as it ignored both the entirety of the Second Amendment and a President’s clear Constitutional obligation to ensure the laws are faithfully executed (which is the source of the President’s regulatory authority).

Arguably, Thomas Massie’s demonstrated legislative shortcomings as well as what must be acknowledged as mainly performative “no” votes were what left him vulnerable to attack by President Trump—whom voters in Massie’s district supported even more strongly than they had Massie. He had not been instrumental in bringing any Congressional funding home to his district. He had no clear legislative successes to which he could point to make a case that he had genuine political clout, able to deliver tangible benefits to the Kentucky Fourth Congressional District. His politics have proven to be performative rather than practical or pragmatic.

Simply put, Thomas Massie was not just an insignificant legislator on Capitol Hill, he was for the most part an irrelevant one. He did not reach out to build legislative coalitions to pass bills he thought were important. He was not willing to engage with other political coalitions, preferring instead to strike a “lone wolf” pose with a contrarian and usually ineffective “no” vote.

His penchant for contrarian votes, while a delight to many libertarian-minded and small government people, coupled with a conspicuous lack of a unifying political philosophy, ended up making his tenure in Congress more a performance piece than a serious legislative career. When contrarian votes demanded substance, a clear and thorough explication of the “why” behind such votes, Thomas Massie offered little more than snark, such as his gratuitously ad hominem post on X implying that President Trump’s war with Iran was intended as a distraction from the Epstein files.

Such commentary ignores the very real and very serious security and geopolitical issues that are at the heart of the conflict between the US and Iran. One need not agree that those issues justified Operation Epic Fury to acknowledge that those issues exist. At a moment when so many more relevant and substantive objections to the war could be raised, Massie provided merely a performative posting that reads more like the clickbait we get from social media influencer types and pretend journalist/commenator types like Tucker Carlson and Megyn Kelly.

Politics is, in the words of Prussia’s famous Chancellor Otto von Bismarck, “the art of the possible.” Politics is indisputably a team sport. Alas for Thomas Massie, he never showed much interest in being a team player. Had he been willing to be more engaging with other political interests and causes, he may very well have notched some significant legislative accomplishments. Had he been more forthcoming with a fully articulated political and legislative philosophy, he might have established a more ideologically committed base to stand with him when President Trump decided Massie’s contrarian stances were an irritant that needed to be removed from Congress.

This is not idle speculation. Great Britain’s decision to ultimately ban the transatlantic slave trade and emancipate its former slaves owes much to the tireless campaigning of one man—William Wilberforce. Between 1787 and 1823, Wilberforce by degrees moved the political needle in the British Parliament from supporting slavery because Britain’s monied interests liked it to banning the slave trade entirely in 1807 and emancipating former slaves in 1823. His position was not a popular one, yet by degrees, and through much political struggle and opposition, he ultimately succeeded where lesser men had failed. By focusing on what he wanted to accomplish, accepting compromise legislation when necessary, Wilberforce almost singlehandedly reshaped the British Empire.

Ultimately, Thomas Massie’s exit from the political stage should serve as an object lesson for all who would engage in politics at any level: the greatest impact, and the greatest durability, will always go to those who choose accomplishment over performative posturing.

If there is a moral to Thomas Massie’s Congressional career, it is that legacies are built on substance rather than snark.

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The Producer Price Index for final demand increased 1.4 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.7 percent in March and 0.6 percent in February. (See table A.) The April increase is the largest advance since rising 1.7 percent in March 2022. On an unadjusted basis, the index for final demand rose 6.0 percent for the 12 months ended in April, the largest 12-month increase since moving up 6.4 percent in December 2022.

The 6 percent year on year rise was more than a percentage point above what Wall Street projected.

At 5.2% year on year, core producer price inflation was also well above Wall Street estimates.

In the space of just two months, headline producer price inflation nearly doubled, and core producer price inflation was not far behind.

The CPI print established that we are seeing the beginnings of stagflation seeping into the US economy. The PPI print is telling us that we are going to see more stagflation over the next month or so…but we may not see much beyond that.

The PPI print is bad. The PPI print may also be telling us the worst is either behind us or very nearly so.

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This Time, More Than Just Energy

A 6% headline PPI print year on year is never good news, but when it comes with a 5.2% core PPI print year on year, that is even worse. That is the PPI print we got for April.

Energy has been pushing the headline PPI data up since the beginning of the year, but in April the price surges extended beyond just energy.

Even month on month, core PPI was hotter than it has been at any time previously during the second Trump Administration to date.

Core producer price inflation had been cooling off since January. April ended that trend decisively. The sliver of good news from the March data evaporated completely in April.

We can’t point to energy prices as the culprit for core inflation—by definition the PPI data set segregates energy prices along with food prices to arrive at the core data set. This surge in core producer prices means there are price shocks and even supply shocks emerging besides energy prices.

In other words, stagflation is spreading.

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Energy Prices Hot, But Maybe Cooling?

While energy prices remained elevated in April, within the PPI data energy prices showed some disinflation after the March surge.

At 7.5% month on month, energy prices still showed the second hottest factory gate inflation print since the start of Donald Trump’s second term of office, but that it came in below the ultra-hot March print of 10% leaves at least a slender hope that there might be future cooling of inflation.

The April data also saw both unprocessed fuel prices rise marginally and processed energy goods prices ease slightly.

The market data shows a similar level of easing. Global diesel prices rose approximately 40% in March, while the Singapore Gasoil Futures contract rose “only” 17.6% in April, while the NY Harbor futures contract for diesel rose 9.8% and Europe’s Gasoil Low Sulphur contract rose 15%

Double digit percentage price growth in a single month is a large price increase. There is no avoiding that reality. There is also no avoiding the mathematical reality that 17% is less than half of 40%. Price inflation for diesel around the world was significant in April and considerably less than March. By definition we are seeing a decrease in inflationary pressures just within diesel fuel.

Maritime bunker fuel rates actually showed some decline in April.

After peaking in early April, fuel rates began to drop again, until April 21 (one week after the US Navy blockade took effect). Even with the rise at the end of April, bunker fuel prices were still below where they peaked earlier in the month. Despite the war with Iran, despite the closure of the Strait of Hormuz, in April we had outright deflation in maritime bunker fuel prices.

That the energy price surges are being driven by the oil dislocations in the Persian Gulf is self-evident. With roughly 20% of global oil supply either offline or in jeopardy, extreme price shocks are exactly what we would expect as a market response.

Even so, we can take some small comfort from the fact that the April surge was less than the March surge, and that the April surge was not across the board in all energy-related products. While we should take care not to extrapolate too much from just two months’ worth of price shifts, if March should prove to be when the inflation data peaked, the overall magnitude of the stagflation crisis we see unfolding in the US economy will be less than it could be otherwise.

That is, of course, me being hopeful. The data itself offers no assurance that we will not see future oil price surges dwarfing what we saw in March and April. April saw less inflation than March, but that is no guarantee that May will not see more inflation than April. With prices being driven primarily by the ebb and flow of war in the Persian Gulf, any change in the geopolitical status quo could either ease the stagflation crisis globally or exacerbate it globally. Neither outcome is improbable at the present time.

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Food Prices Crept Up, Along With Goods

In a sign that the inflationary pressures on energy are spreading into other items on the Producer Price Index, food price inflation flipped from deflation in March to rise 0.22% in April.

While the return of food price inflation is a signal that the inflationary pressures on energy prices are spreading beyond just energy, we should note that, a less than a quarter of a percentage point, the increase itself is incremental.

Goods prices showed a similar incremental increase from March, with inflation rising from 1.9% to 1.96% month on month.

Service prices, however surged by very nearly a full percentage point in April.

The rise in service price inflation accounted for 60% of the overall rise in the PPI for April. While energy is the obvious price shock, and a continuation from March, services were what drove most of the April PPI increase.

Within Final Demand for Services, the primary inflation driver was in Transportation and Warehousing.

While not a direct energy price itself, transportation prices especially are easily seen as “energy adjacent” (if only because of fuel costs), making them the obvious next layer of inflation to come after a surge in energy prices.

Rising energy prices are pushing up service prices. Given the ubiquity of transportation costs through out the whole of the US economy, as transportation prices are pushed up, we should expect to see other prices being pushed up in future months as well. The price surge is not going to remain limited to just transportation.

Even so, while we are seeing a surge in transportation prices, that is the only place we are seeing significant new inflationary pressures for April. Goods price inflation overall was not much greater in April over March.

When we look at retail fuel prices from the EIA, we have further confirmation that there are no new inflationary prices entering the picture. After posting a nearly $2/gallon increase in March, retail diesel prices largely plateaued for April.

While retail gasoline prices continued to rise in April, the pace of the increase was much slower than in March.

Are we nearing what will be the peak in retail fuel prices? The overall trajectory certainly suggests that fuel prices are nearing a ceiling level. That would also imply that transportation prices might not rise much further in coming months.

The data does not allows us to extrapolate to that degree with confidence, but the possibility is certainly there.

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Intermediate Demand Inflation Getting Worse

Where we do not see signs of a ceiling level is among intermediate demand prices. There factory gate inflation rose from March to April for each intermediate stage.

This is the clearest signal within the PPI data set that there is significant inflation still to work through to final demand goods and services, and from there into the Consumer Price Index. While we have reason to hope that some inflationary pressures may already be reaching a maximum, given the levels of disruption from the Persian Gulf, those pressures are still reverberating through the rest of the economy, and that means they will be pushing other prices up in May and June, and possibly beyond.

That is especially worrisome news when it comes to fertilizer prices.

While nitrogenous fertilizer manufacturing has been showing signs of inflationary pressure even back in January, well before Operation Epic Fury, phosphatic fertilizer manufacturing was showing no such pressure prior to April.

If we drop back to the year on year perspective, we see that nitrogenous fertilizer prices have been moving up since early 2025. Phosphatic fertilizer prices do not show much of any price increase before April.

Rising fertilizer prices mean a major cost in food production is also rising—a cost which is difficult to control without diminishing levels of food production itself. Cut back on fertilizer applications and harvest yields are likely to diminish. Both as a direct cost and as a secondary effect of reduced harvest yield, rising fertilizer prices today mean we are seeing a food price inflation surge building for later in the fall and into 2027.

April was a mild month for food price inflation. Future months will not be quite so mild.

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How Much More Inflation Will We Get?

The significance of producer prices is that they are seen as a leading indicator for consumer prices. Major inflation shifts often emerge in the producer price index first, and in the consumer price index a month or two later.

Certainly when we look at the Producer Price Index and the Consumer Price Index percent changes year on year, we see the CPI trend is roughly one to three months behind the PPI trend, particularly when there are major price shifts.

When the changes are smaller the correlation becomes a less certain, but when there are large shifts, they generally impact the Producer Price Index first.

If we see a peak in year on year inflation for the Producer Price Index, we may expect to see a similar peak in the Consumer Price Index in the very near future. If we see a trough in the PPI, a trough in the CPI is not far behind.

Right now, we are seeing a major surge in the PPI. This suggests there are future rises in the CPI for May and probably June also.

Yet we are also seeing signs at least within energy prices that the inflationary pressures pushing prices up may not get much worse than where they are at today. Energy price inflation may have already peaked, and other prices may be on the verge of peaking. Retail fuel prices may be reaching a ceiling level beyond which they are not likely to go.

We are seeing a major surge in the PPI, but we are also seeing signs the peak may not be far off.

While the final verdict on energy price inflation will only come when the Strait of Hormuz is finally re-opened as an international waterway (which itself is not likely to come before there is a final peace between the United States and Iran), it may very well be that the total impact of the Strait’s closure is not going to rise much further. If President Trump and the War Department decide to simply continue the US Navy blockade of Iranian shipping, and do not resume major hostilities against Iran, the current state of affairs in the Persian Gulf may develop a short-term stability, where the magnitude of changes day to day and month to month do not shift dramatically.

Should we see even a temporary geopolitical equilibrium in the Persian Gulf, we should expect to see also a temporary equilibrium in energy prices, and from energy prices transportation and then other prices. Where there is significant inflation today we may not see significant inflation tomorrow.

Note, however, that a possible lack of future inflation is not the same as suggesting that oil and other prices are going to drop quickly. While equilibrium and a price plateau are possible even without peace between the US and Iran, price reductions are not. For oil prices and then other prices to come down, we must first have peace between the US and Iran.

How much energy price inflation—and thus how much stagflation—we ultimately get hinges entirely on the future of oil prices, and that rests entirely on how the war between the United States and Iran evolves. A peace deal would bring prices down, a mere continuation of the US Navy blockade would keep the current elevated prices in place, and a resumption of hostilities could easily push oil prices quite a bit higher.

Each scenario carries its own outcome on oil prices, and thus each scenario carries a consequent impact on overall inflation, first Producer Price Inflation then Consumer Price Inflation. We do not know—and cannot know—which scenario we will have for the coming months until we have it.

Will we get more inflation? It is entirely possible.

Is the worst energy price inflation behind us? It is possible, even probable, that the biggest energy price shifts are already behind us. That would mean the biggest price shifts giving rise to stagflation concerns may already be behind us as well, or soon to be behind us.

That is the optimistic outlook—one might even call it a “Trumpian” outlook. Whether that outlook is the ultimate outcome is, for now, a question for which we do not have an answer.

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Now that the April Consumer Price Index Summary is out, we are beginning to see how that energy shock is reverberating through the rest of the US economy.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in April, after rising 0.9 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment.

The index for energy rose 3.8 percent in April, accounting for over forty percent of the monthly all items increase. The shelter index also increased in April, rising 0.6 percent. The index for food increased 0.5 percent over the month as the index for food at home rose 0.7 percent and the index for food away from home increased 0.2 percent.

The index for all items less food and energy rose 0.4 percent in April. Indexes that increased over the month include household furnishings and operations, airline fares, personal care, apparel, and education. Conversely, the indexes for new vehicles, communication, and medical care were among the major indexes that decreased in April.

The all items index rose 3.8 percent for the 12 months ending April, after rising 3.3 percent for the 12 months ending March. The all items less food and energy index rose 2.8 percent over the year, following a 2.6 percent increase over the 12 months ending March. The energy index increased 17.9 percent for the 12 months ending April. The food index increased 3.2 percent over the last year.

The TL;DR version: prices are up. As with last month, this is not a surprise. Even with the Personal Incomes and Outlays report, it was clear that April would see inflation heating up, and beyond just energy prices. The only question was simply “how much?”

We are going to see elevated energy prices again in April. How much we see either inflationary impacts or stagflationary impacts beyond energy prices remains to be seen.

Beyond energy price inflation, the fog of war still surrounds the economics of wartime.

Energy price inflation is continuing, but food price inflation is returning, and non-durable goods inflation is also heating up, although still primarily from energy price inflation.

Stagflation is starting to creep into the US economy. The price shock that started with energy prices is percolating throughout the rest of the Consumer Price Index.

Thus far, the worst impacts are still contained to energy prices. Do not be deceived, however. Prices are heating up across the board and we should expect that trend to continue for at least as long as the war with Iran continues.

We now know we will have stagflation. What we do not know is how much we will have. Not yet.

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Headline Inflation Actually Cooled, And So Did Core Inflation

While there is no denying that the energy shock continues to pound the US economy, there is also no denying that the price shock’s impact was less in April than it was in March.

Year on Year, both headline and core inflation rose, and rose significantly.

Yet Month on Month, inflation was more restrained

There is one encouraging aspect in both the headline and core inflation figures for April: headline inflation cooled significantly, although core inflation printed 0.27pp higher on the month. This is a reversal from the first few months of 2026, where core inflation was coming down even as headline inflation was heating up.

Core inflation strips out the energy component. A sharp rise in core inflation is almost certainly indicative of a contagion effect where energy price inflation is creating inflationary pressures on other consumer prices, and so the inflation effect spreads.

Stagflation is clearly stalking the US economy.

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Energy Prices Rose, But Less Than Before

One possible note of encouragement about energy price inflation: we had less of it in April than in March.

For all energy components, the April price shift was a disinflationary one.

Upon inspection, however, this is not surprising. Oil prices rose approximately 14% for Brent Crude in April, and 10% for West Texas Intermediate.

In March oil prices were up by as much as 33% for Brent Crude.

Diesel prices for Europe displayed similar trajectories, rising 17% in April, compared to 12% for the United States.

Energy price inflation remains elevated, but the magnitude of the April increase has been much less than it was for March, and we are seeing that in the overall CPI data.

Could this be an indication that the overall inflation impacts of the war with Iran will be relatively brief, with price rises starting to ebb either next month or in June? That is a possibility. However, a lack of energy price inflation should not be confused with energy price deflation. We may see energy prices stop rising. We should not anticipate much in the way of a decline in energy prices until the Strait of Hormuz is opened for navigation once more.

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Food Price Inflation

One very not good price shift in April was an increase in food price inflation.

After ticking down ever so slightly in March, for April food prices jumped 0.5pp month on month.

However, we should also note that, year on year, food price inflation remains in a dynamic equilibrium around 3%.

We should not expect this trend to hold for very long. While inputs for food prices thus far have not been dramatically impacted by the war with Iran, we are seeing a marked surge in fertilizer prices. While this will have less impact on the crops already planted, it will have larger impacts for crops which get harvested later in this year or early next year.

The impact of higher fertilizer prices varies across farms depending on the timing of fertilizer purchases and the type of nitrogen fertilizer used. Farms that purchased fertilizer prior to February will see limited impacts on 2026 production costs. In contrast, farms that delayed nitrogen purchases are exposed to recent price increases. Anhydrous ammonia is typically the lower-cost nitrogen source compared to nitrogen solutions. All farms are expected to face significantly higher costs for the 2027 crop.

That impact is being felt worldwide, and especially in Europe.

For spring, Europe’s farmers got lucky. Most had stocked up on fertilizer before the war, and European Commission officials say this season’s needs are “largely secured.”

That luck is running out. Farmers are now placing orders for this fall’s plantings, and the math doesn’t work out. Wheat is selling for the same price it sold for before the war, even as fertilizer costs have risen. Some growers are cutting back on nitrogen. Others are switching to crops that need less of it. Both choices mean smaller harvests in 2027, when shoppers will finally feel the effects of the war.

While food price inflation is on track to be more severe in Europe than in the United States, the US is also on track to experience significant food pricing inflation.

Food prices are going to be driven by the bounty of each crop, and the bounty of each crop is contingent largely on the amount of fertilizer applied. With fertilizer costs increasing, if farmers reduce fertilizer usage then crop yields will suffer, pushing up prices, and if farmers sustain current levels of fertilizer usage, then the costs of producing the crop will eat into the profits, again pushing up prices.

The upward pressure on fertilizer prices from the surge in energy prices can only resolve one way—with higher food prices and for longer.

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Stagflation Is Starting, But Still Restrained

The data is clear: we are seeing the initial indications of stagflation taking root in the US economy.

However, we should presume that this means all prices are going to surge to extraordinary levels. At present, that is not happening.

Durable goods prices actually fell in April.

Non-durable goods however, still showed elevated month on month inflation, although it had cooled significantly from March.

The non-durables increases, however, come with the caveat that much of this is due to energy price inflation already noted.

Without energy price inflation for non-durable goods would be greatly reduced.

Service price inflation more than doubled in April.

Shelter price inflation also doubled in April 2026.

We should note, however, that the more forward-looking Zillow Observed Rent Index shows shelter price inflation increasing on a more regular cycle, making it less likely for inflation in housing to be the result of dislocated supply.

Inflation is indisputably heating up more or less across the board, but we are not (yet) seeing the price surges we have been seeing in energy.

That blessing is likely to prove highly transitory, however. The longer the war with Iran drags on, the longer the Strait of Hormuz remains closed, the greater the stagflation pressure on the US economy.

We are seeing a little stagflation now. We will see more next month, and even more the month after that, until there is peace in the Middle East once more.

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Inflation + Deflation = Stagflation

Because we don’t talk about stagflation often, it behooves us to maintain awareness of what the term actually means.

Conceptually, stagflation is when rising prices collide with low economic growth or even economic contraction1.

An easy sign of low economic growth is weak unemployment—the so-called “misery index” is predicated on rising inflation and rising unemployment—but we can also see indications of weak or sub-par economic growth in whether or not we have inflation or deflation in certain price subindices.

When we look at how inflation is unfolding relative to the various subindices, how we are seeing persistent deflation in durable goods, and arguably in non-durable goods as well, we see that the energy price shock can very well be the sort of supply-side shock which, when coupled with deflationary pressures, produces stagflation.

While the data is still too new to have supreme confidence in the conclusion, the similar inflection points from March to April suggests that energy price inflation is crossing into other goods and services.

However, we are also seeing deflation occurring in durable goods prices. With non-durable goods, it is highly likely that most if not all of the inflation we are seeing there is the result of energy price inflation.

When we look at specific durable goods categories, such as automobiles, we see that overall retail sales have largely plateaued and even declined since the start of 2025.

Unsurprisingly, new and used car prices have printed mostly deflation since the start of 2025.

Another unavoidable sign of weakness is that weekly earnings have, for the most part, not kept pace with inflation, as most paychecks have yet to recover from the 2022 hyperinflation cycle.

Even goods producing jobs are, as of the April data, have only just recovered from 2022. If inflation continues at an elevated rate, even goods producing jobs will quickly lose ground to inflation again.

The end result of the intersection of rising prices brought on by supply shocks is that demand destruction is the only way an economy can rebalance after such a shock.

Energy prices are rising because the availability of energy-related products is suddenly significantly reduced. The reason for the scarcity is obvious: the closure of the Strait of Hormuz and consequent disruption of Persian Gulf oil flows. The supply of oil available at all price levels has been reduced.

When there is a sudden drop in supply for anything, demand can only reach a new equilibrium level through demand destruction. Quantities purchased must go down to match the new supply curve.

That is what we are likely to start seeing over the coming months: demand destruction, as consumers adapt to suddenly higher energy prices.

The consequence—and cure—for stagflation in any economy is always going to be demand destruction. That’s the next evolution that we will soon see in the US economy.

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How Much Worse Can It Get?

With an ongoing price shock pushing up first energy prices and then prices for other goods and services, and with peace seemingly elusive with Iran thus far, the natural question to ask at this point is “how much worse can it get?”

In the worst case scenario, it can get quite a bit worse. If events in the Persian Gulf result in greater damage to both Arab and Iranian oil infrastructures, if Qatari LNG production is further damaged and pushed offline for a number of years, energy prices will be elevated for a number of years.

Those higher energy prices are already pushing up diesel prices around the world to nearly double pre-war levels. Those higher energy prices are already pushing up bunker fuel prices for shipping. That much is happening, and it could get significantly worse if the war with Iran takes a violent turn and more infrastructure damage is unleashed by both sides.

Maersk CEO Vincent Clerc is already warning the investor community that, if elevated fuel costs persist, shipping companies will be compelled to pass along at least a portion of their increased fuel costs.

The more benign scenario for the US will be that US oil production serves to stabilize energy prices here in the US. Diesel prices remain high, but do not get much higher. Bunker fuel rates for shipping remain high, but do not get much higher.

When there is no price increase, inflation is zero. However, if prices stabilize at a new, higher level, inflation is still zero but the affordability of goods and services is constrained until earnings catch up to inflation. As we are already seeing, that is not a quick process.

With earnings lagging inflation, and that inflation driven entirely by supply shocks and sudden increases in scarcity, we have enough weakness evident in the US economy to acknowledge that the April CPI report shows the beginnings of a stagflation episode. Prices are up, supply is down, and eventually demand will be down as well to compensate.

How much will prices be pushed up in May or June? That we do not know. Future price movements in oil and related refined products are entirely at the mercy of the Strait of Hormuz. Reopen the Strait and get Persian Gulf oil flows trending back to pre-war levels, and the inflationary pressures on energy are immediately alleviated. The inflation dynamic right now is as simple as that.

At present, the Strait of Hormuz remains blocked, and all indications are that it is going to remain blocked for at least a little while longer. Energy price inflation is going to rise for at least that little while longer. Stagflation will stalk the US economy for at least that little while longer.

We have stagflation. The fog of war means we do not know how much stagflation we will ultimately have.

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Total nonfarm payroll employment edged up by 115,000 in April, and the unemployment rate was unchanged at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, transportation and warehousing, and retail trade. Federal government employment continued to decline.

That figure was certainly a surprise to Wall Street, which had a much more conservative projection prior to the report’s release.

Yet on closer examination, the jobs report still carried distressing signals that all is still not well with US job markets.

Joblessness still rose, and the number of people no longer in the labor force still rose. That’s not a good sign.

Key sectors still experienced a drop in employment. That’s not a good sign.

Wages rose, but, in light of the March price shocks from the war with Iran, which are all but certain to be even greater in April when the Consumer Price Index data gets published next week, they are not gaining ground on inflation.

The headline jobs number was indisputably positive. The details underneath…not so much.

Stagflation is (almost certainly) coming.

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Lou Costello Corrections

As with every Employment Situation Summary report, we have to take the headline numbers with a grain of salt. We know the April numbers will be revised in May and again in June, and we know that the revisions can be substantial.

The Bureau of Labor Statistics revised February’s job loss shocker down by an additional 23,000.

The change in total nonfarm payroll employment for February was revised down by 23,000, from -133,000 to -156,000, and the change for March was revised up by 7,000, from +178,000 to +185,000. With these revisions, employment in February and March combined is 16,000 lower than previously reported.

Of the 331,000 new jobs initially reported during the first four months of 2026, 27,000 of them never existed.

We should anticipate future downward revisions to the job numbers, for once again the Employment Level from the Current Population Survey (Household Survey) diverges sharply from the Current Employment Statistics (Establishment Survey) All Employees Data.

That is a strong sign that Lou Costello Labor Math is at work in the jobs numbers.

If the number of new jobs is rising, the number of employed people should also be rising. That, at least, is the theory.

Why the reality is different highlights the ongoing data inadequacies of the Employment Situation Summary, and necessarily colors any analysis.

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Corporate Media Does Not Question The Numbers

In their usual demonstration of journalistic inadequacy, corporate media once again take the report at face value.

CNN maintains the fictitious narrative that US labor markets are healthy and robust at the moment (they are not).

April’s employment gains mark an expected retreat from March, when a revised 185,000 jobs were created, boosted by factors such as the end of large labor strikes as well as favorable weather.

However, the job growth seen last month was much stronger than the 65,000 that economists had estimated. No change in the unemployment rate was anticipated.

The war in the Middle East wasn’t expected to negatively affect April’s employment numbers but it still presents a risk. The health of the US labor market and the broader economy could be negatively affected if gas prices stay persistently high and cut into consumer spending, raise business costs, as well as trickle into higher prices for other goods and services.

CNBC touted the consistency of the unemployment rate as proof of labor market health.

Nonfarm payrolls rose by a seasonally adjusted115,000 for the month, down from the 185,000 created in an unusually strong March but better than the 55,000 forecast in the Dow Jones consensus estimate.

The unemployment rate held at 4.3%, further proof that the labor market has reached a point where only modest job creation is needed to keep the jobless level steady, given little growth in the labor force.

Politico touted the jobs report as a clear victory for President Trump.

The Labor Department on Friday reported that U.S. employers added 115,000 jobs in April — more than double the 55,000 projected by surveys of economic forecasters — and the jobless rate was unchanged at 4.3 percent. With unemployment hovering below historic averages, and private sector hiring showing signs of a revival, GOP and White House messaging shops quickly seized on the report as proof that Trump’s economy is humming.

“The April jobs report is a clear upside surprise,” Eric Merlis, a managing director and co-head of global markets at Citizens Bank, said in a note shortly after the report’s release. And “importantly, the data suggests the hostilities in the Middle East have had little visible impact on the U.S. job market.”

Alternative media is not necessarily any better, with Breitbart insisting that labor demand is strong and that the “break even” jobs number is close to zero (it clearly isn’t.

That world is gone. What replaced it is a labor market in which the constraint has flipped to the supply side. The era of mass immigration supplying a steady stream of excess labor is over. As a result, the break-even rate — the number of new jobs the economy needs each month just to keep the unemployment rate stable — has fallen from the roughly 250,000 per month figure that became conventional wisdom during the Obama years to something closer to zero. Research from the Dallas Fed and the Federal Reserve Board has been pointing in this direction for quite some time, but the implications still haven’t sunk in for most analysts.

What’s more, demand for labor is extraordinarily strong. Except for the pandemic lockdown period, for years now we’ve been consistently below levels of unemployment that economists once thought were the markers of a healthy economy. Unemployment rates that once would have been seen as evidence the economy was overheating are now the norm.

Even the usually cynical ZeroHedge, while it acknowledged the negative signals in the report, led with the Employment Situation Summary turning in the first back to back pair of job gains month on month in over a year.

In his preview of today’s NFP report, Goldman’s Delta One head wrote that “NFP almost feels like a sideshow at this point. You can argue weak labor data gives a Warsh led Fed enough cover to cut, but with oil and input inflation still elevated there’s also an argument that a weakening labor market alongside a constrained Fed is actually the more difficult combination for risk assets.” With that in mind, moments ago the BLS reported that in April the US added a red hot 115K, above the median consensus of 65K (and near the upper end of the forecast range which peaked at 133K), down from an upward revised (for once) 185K (originally 178K). This was the first back to back gain in jobs in a year.

Given the disparity between the Employment Level and All Employees payroll level, we should not expect either the March or the April figures to remain at their elevated levels. I shall be happy to be proven wrong, but the divergence strongly suggests the ESS jobs data remains sketchy and problematic at best.

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Uneven Job Growth

Also of concern is the uneven nature of the reported job growth.

Unlike the March JOLTS data, which showed across the board job growth, the April data is tempered by job losses in notable sectors.

Of particular concern is Manufacturing once again shedding jobs, which has been its pattern for far too many months now.

That is a sobering reminder that, even with job gains in Mining and Construction, goods producing jobs are still not in perfect health.

Among service providing jobs, one positive note was the increase in Trade, Transportation, and Utilities jobs.

For a change, TTU job growth outpaced Healthcare job growth.

The strong gains in these two sectors served to counter the job losses in Information and Finance.

Leisure and Professional Services posted unremarkable job growth.

At a time when Artificial Intelligence is generating much hype and hooplah in the media, the continued loss of Information sector jobs should stand as a reminder that AI is far from the proven economic revolution many proclaim it to be.

There is strong growth reported in some job sectors. Other job sectors continue to underperform, with minimal job growth or actual job loss.

This is not a rising tide of employment which is lifting all job ships.

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Joblessness Rises

While the official unemployment rate is reported as remaining unchanged, that assessment is a result of rounding at the first decimal place rather than the second.

When the ratio of unemployed persons to the overall workforce is carried another decimal place, the official unemployment rate shows a rise from 4.26% to 4.34%.

More significantly, the “real” unemployment rate—the official count of unemployed plus those not in the labor force but who want a job now—rose from 7.49% to 7.60%.

The actual count of unemployed workers rose 7,373,000 in April.

While this is still down from a November 2025 peak, it is still significantly higher than where it was at the start of the Trump Presidency.

The peak was earlier for those Not in the Labor Force who Want a Job Now, but the longer term trend is still rising.

The overall category of workers Not in the Labor force has been trending up since January 2025.

Whatever the “break even” jobs number is for the US economy, it is clearly somewhere north of 115,000. A break even figure would leave both unemployment numbers and those not in the labor force decreasing rather than increasing.

This rise in joblessness is consistent with the ongoing decline in the overall Employment Level.

The current decline is the third such period of stalled or negative employment growth in the US since 2021. Aside from brief episodic bursts of employment, employment growth has been problematic since the beginning of 2022.

This lack of employment growth shows up as a persistent decline in the Employment Population Ratio since 2023.

If employment is declining, if the employment population ratio is declining, and if joblessness is rising, the one thing we cannot say is that labor demand is “strong”. Certainly it is not “strong enough.”

At the macro-economic level, that’s a problem.

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Wages Remain Soft

While wages are increasing in nominal terms, only goods producing wages have fully recovered from the 2022 hyperinflation cycle. Service producing wages and overall private sector wages remain very much behind inflation.

Also of concern is that, broadly, wage growth by sector has been getting softer as we move through 2026.

Even though manufacturing wages had just caught up with inflation at the start of the year, the recent price shocks and consequent inflation increases make it unlikely that manufacturing wages will continue to remain above the rise of inflation.

Most service providing wages remain below the inflation curve and have not recovered any real ground after the 2022 hyperinflation cycle.

When the Consumer Price Index data comes out next week, these sectors are all but certain to have lost even more ground—even Healthcare, which has been the mainstay of job growth in the US.

Nor should we be surprised that wages remain soft. When there is rising joblessness, by definition labor supply is outstripping labor demand. When supply is plentiful and demand is scarce, prices—in this case, wages—drop.

Soft wages and rising joblessness tell us in unequivocal terms that we still are not producing the numbers of jobs we need to keep joblessness at bay or on the decline.

If the economy were producing jobs above the much-ballyhooed “break even” number, wages would be rising. In sector after sector, they are not.

That’s a problem.

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Signs Of Stagflation?

With signs of soft labor markets within the jobs report, the coming (and by now unavoidable) inflation shocks lead to a very uncomfortable question: is the US about to experience a stagflation crisis such as it saw in the 1970s?

Certainly the risks of stagflation are real. I have written about those risks quite a bit in the past and the war with Iran give those risks an immediacy they did not have before.

Nor can we overlook the reality of a growing stagflation crisis in China, as their petroleum supply chains get disrupted from the war with Iran.

On Friday, Maersk Shipping CEO Vincent Clerc warned that price increases were heading into most economies, as shipping companies grapple with the increased costs of bunker fuel. Such increases are likely to entail at least a measure of demand destruction.

“As some of these costs make their way all the way up to the end consumer, will we see demand destruction at the consumer level? And will that then reverberate throughout the supply chain with softer demand in the second part of the year?” he questioned.

“That is certainly something that we’re looking out for very, very closely, because it would suddenly change the equation on how this crisis is going to impact the global supply chain and our industry in particular.”

Nor can we assume that Clerc is merely using the war as a cover to push through price increases as a form of rent-seeking behavior. That Persian Gulf oil production has fallen precipitously just through March is already established.

While bunker fuel rates had been declining in the start of April, by the end of the month they were clearly trending up.

Additionally, signs of global oil supply disruption are increasing, as observed global oil inventories, which had been rising in 2025, are anticipated to decline as the disruptions from the Persian Gulf take hold.

An oil supply shock may even be in store for the US, as crude inventories—including those in the Strategic Petroleum Reserve—are declining at present.

Exactly how great a supply shock there might be is problematic, because while production has not varied much over the past year—and has even dropped off in recent weeks—there has been growth in US exports of refined products.

There are definite stresses to US oil supply due to emerge within the US economy, but there is also a not insignificant export buffer which can cushion some of the shock.

If the war with Iran persists, we are very likely looking at a global economic scenario where the question is not if there will be stagflation, but how much stagflation will there be? Right now, that estimate is rising.

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Good But Not Good Enough?

The April jobs report shows there was job growth in the United States. That report echoes the ADP report and is a continuation of reporting trends from March. Even if we anticipate significant corrections to the data (and I do), we are still looking at a report that shows a greater level of job growth than we have seen in recent months.

Job growth is always a good thing, and on that basis the April jobs report is a good report. Yet job growth that does not meet or exceed the available labor supply—job growth that comes in below the “break even” threshold, is ultimately a net negative.

We need to create more jobs in this country, and we need to create significantly more jobs than the 115,000 reported as the headline figure for the April report.

We need significant increase in labor demand because that is the only way we can get increases in wages, allowing workers to finally catch up to the 2022 hyperinflation cycle. Wage increases are likely to become a particularly thorny topic, as the war with Iran is quite probably going to give rise to at least a brief surge in inflation, if not a completely new hyperinflation cycle.

In April we got significant job growth. Unfortunately, we did not get enough job growth. We certainly are not getting needed wage growth.

March and April have produced sizeable jobs numbers, and that has lent them an optimistic, upbeat appearance.

However, with joblessness rising and wages not rising, we are faced with the blunt reality that March and April were not good enough. With corrections still yet to be made, March and April should be anticipated to be seen as less good than they are now.

Without the war with Iran, this would have been a good jobs report. With the war with Iran, this is a cautionary jobs report, and a warning that future months are not likely to be at all as good.

Stagflation is (almost certainly) coming.

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The IRGC may have thought it was making a bold move and doing a little geopolitical flexing with its attack on the UAE. It is quite likely this attack will prove to be an epic blunder.

Tonight the ceasefire is holding. Tonight, the IRGC is still in charge in Tehran.

How long either of those statements remains true is anyone’s guess.

Against all odds, the ceasefire is technically still in effect, although both sides are making an increasing number of attacks on the other.

Last Friday, the US disabled two ships attempting to run the blockade on Iranian shipping.

Previously, Iran fired missiles at US “enemy units” as they sought to intercept another ship trying to run the blockade.

Iran is also reported to have launched additional missile and drone attacks on the United Arab Emirates, a curious escalation by the IRGC in a conflict already fraught with regional and global tensions.

Meanwhile, both the US and Iran claim to be winning the war, an Iran in particular is demanding other nations acknowledge it as a regional superpower.

Most of the week has been spent waiting to see if Iran would formally respond to US peace proposals. Today Iran officially responded.

In light of the IRGC’s recent demands, we are on safe ground summarizing the Iranian response as an emphatic “no.”

While the escalations themselves have largely yet to happen, it is highly likely that the next phase of this war with Iran will be more actual war—more bombings, more drone strikes, and more destruction.

Iranian intransigence on their illicit nuclear weapons program and illegal seizure of the Strait of Hormuz are foreclosing all other options. At present, there is no realistic alternative on the table for dealing with Iran’s multiple threats to the world except by war.

The Peace Deal

At the start of last week, a curious lull had developed in the war with Iran. The ceasefire was (mostly) holding, although there had been no peace breakthroughs or signs that negotiations would resume.

That lull ended on May 4, when Iran struck the United Arab Emirates oil terminal and refinery at Fujairah, outside the Strait of Hormuz.

The UAE’s defense ministry said three cruise missiles coming from Iran were intercepted and a third fell into the sea, and told its citizens the loud booms heard inside the country were the result of those aerial interceptions.

As I observed in my last article, Iran might have revealed more about its strategic objectives than it intended with that strike. Fujairah is one of the few Persian Gulf oil terminals outside the Strait of Hormuz.

Even as Iran continues to push its claim of right to control traffic through the Strait—a claim which is completely rejected by the UN Convention on the Law of the Sea (UNCLOS)—Iran is separately attacking the infrastructures which Arab States might use to bypass the Strait and thus negate Iran’s diplomatic leverage of being able to deny Arab states in the Gulf the capacity to export their oil and natural gas.

If that is Iran’s intent, then the strikes on Fujairah are an unmistakable act of war. They are an aggressive demonstration of Iran on offense, not defense. That is not something that other Arab states, particularly Saudi Arabia, will have failed to notice.

It was against this backdrop that United States negotiators issued a “fourteen point memorandum” proposal, one that was less a proposal for peace than a proposal on how to negotiate a peace.

The document reportedly functions less as a full peace treaty and more as a temporary stabilisation mechanism. Under the current proposal, Iran would agree to suspend uranium enrichment activity for a prolonged period — reportedly somewhere between 12 and 15 years — while the United States would gradually ease sanctions and release billions of dollars in frozen Iranian funds.

The fundamental premise of the memorandum was that Iran and the US would stop shooting at each other or at neutral third parties, the Strait of Hormuz would be reopened with unfettered rights of transit passage for all nations recognized, and, most crucially, Iran would surrender its illicit nuclear weapons program.

At the heart of the memo lies the question that has shaped US-Iran tensions for decades: uranium enrichment. According to Axios, the United States wants Iran to commit formally to:

• suspending enrichment activities,

• abandoning any nuclear weapons ambition,

• shutting down underground nuclear facilities,

• and accepting expanded inspection powers, including snap inspections by UN monitors.

One particularly sensitive clause reportedly under discussion would require Iran to transfer its stockpile of highly enriched uranium outside the country — something Tehran has resisted repeatedly in past negotiations.

The nuclear weapons program has been the sticking point between the US and IRGC-dominated Khamenei Regime. The IRGC will not entertain any discussions that involve Iran surrendering its illicit nuclear weapons program—and yet that is the key topic in every discussion with Iran.

The US has acknowledged Iran could pursue a legitimate civilian use enrichment program, which would cap the degree of enrichment below 5%—well out of the range of any peaceful procet.

Secretary of State Marco Rubio told reporters Tuesday that if Tehran wants a “civilian nuclear program,” then it is free to pursue one.

“They could have that if that’s what they wanted, but they’re not acting like that’s what they wanted,” Rubio said in the White House briefing room. “They’re acting like they want a military nuclear program. That’s unacceptable.”

Under the memorandum of understanding, Iran would also agree to inspections by the United Nations on its nuclear program, while the U.S. would gradually lift sanctions and release billions in frozen Iranian funds, according to Axios.

President Trump has been clear and consistent on this point throughout the war with Iran: Iran cannot be allowed to possess nuclear weapons.

For its part, the IRGC refuses to concede that it will be blocked from doing whatever it wants involving weapons grade uranium and plutonium.

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Iran’s Response

Officially, Iran has spent the past several days “reviewing” the US proposal, before rendering an official response. At the time, President Trump oscillated between pessimism and his reflexive optimism on the prospects the IRGC-led regime would accept the proposal.

An Iranian foreign ministry spokesperson cited ​by Iran’s ISNA news agency said Tehran would convey its response. U.S. President Donald Trump said he believed Iran wanted an agreement.

“They want to make a deal. We’ve had very good talks over the last 24 hours, and ‌it’s very possible that we’ll make a deal,” Trump told ‌reporters in the Oval Office on Wednesday.

Earlier in the day, Trump had sounded more pessimistic about the chances of a deal. In a Truth Social post, he threatened to restart the U.S. bombing campaign in Iran, calling ⁠the possibility of Tehran agreeing ⁠to the latest U.S. proposal a “big assumption.”

At the same time, Iranian media released several news items which called into question the key element of any peace proposal—Iran relinquishing its illicit control over the Strait of Hormuz.

While the regime was technically “reviewing” the proposal, the IRGC-linked Tasnim news agency published an article regarding Iran asserting control over the undersea data cables running through the Strait.

Tasnim, in an article titled “Three practical steps for generating revenue from Strait of Hormuz internet cables,” wrote that submarine fiber-optic cables passing through the strait carry more than $10 trillion in financial transactions each day, but said Iran has been deprived of the economic and sovereign benefits of this critical communications infrastructure because of what it called a traditional view of the strait.

The outlet said the Islamic Republic should take three steps: charge foreign companies initial licensing and annual renewal fees; require major technology companies such as Meta, Amazon and Microsoft to operate under Iranian law; and give Iranian companies exclusive control over maintenance and repair of the cables.

Tasnim said the measures would turn the Strait of Hormuz into a “strategic center for legitimate wealth creation.”

Fars, another IRGC-linked outlet, published a similar thread on X, describing Iran as the ruler of a “hidden highway” in Hormuz.

This proposal was and is nothing more than a mafia-like “protection” racket. It is blatant extortion, a point I noted when the article was released.

Folks from New York or Chicago will recognize the “protection” racket the IRGC is intimating (“that’s a useful data cable you have there. Be a shame if something happened to it.”)

Suddenly, the IRGC has decided that the Strait of Hormuz is sovereign Iranian territory, from the seabed on up.

We should note that the UN Convention on the Law of the Sea, which Iran has signed but not ratified, completely refutes Iran’s claims on the Strait. The Strait of Hormuz is and has always been a recognized international waterway, through which there is an unfettered right of transit passage per UNCLOS. As a Strait, under UNCLOS there is an unfettered right of transit passage per Article 38. Under UNCLOS, no states bordering a strait may interfere with the right of transit passage under Article 44.

Article 51 further refutes the notion that Iran has any claim to make on undersea cables.

However, international law and UN treaty obligations are not proving any obstacle for the IRGC regime, which is simply doubling down on bellicose rhetoric every time the Strait is mentioned.

With no breakthrough in sight, Iranian authorities continue to signal an elevated status in their doctrine for the strategic strait, perhaps rivalling the contentious nuclear programme for which the country has been sanctioned and isolated for decades.

The theocratic and military establishment in Iran has “neglected the blessing” of the strait for years, said Mohamad Mohkber, a senior adviser to slain Supreme Leader Ayatollah Ali Khamenei, and first vice president under late Ebrahim Raisi.

“In reality, it is a capability on the level of an atomic bomb, because when you have a capability that can affect the entire global economy with a single decision, that is an enormous capability,” he told state-linked Mehr news agency on Friday.

Following through on that rhetoric, even before the regime had officially sent a response, it made public statements that the Strait of Hormuz would remain entirely under Iranian control no matter what.

At that point, it was an open question if there was anything left in the proposal to which Iran had not already responded.

Earlier today, Iran finally submitted a written response to the US proposal, laying down several demands of its own.

According to diplomatic and Iranian sources cited by Arabic-language media, Tehran’s response places a ceasefire in Lebanon and the lifting of restrictions on Iranian oil exports at the center of any future understanding with Washington.

A diplomatic source speaking to Hezbollah-affiliated Al Mayadeen said the Iranian proposal calls for an end to what Tehran describes as the “siege” on the country and demands unrestricted Iranian oil exports. The source added that a ceasefire in Lebanon is considered one of Iran’s “red lines” in the negotiations.

In sum, Iran’s demands for a peace talks to begin was that the US acknowledge that the war was over, that the blockade of Iranian shipping was lifted, and that all US sanctions on Iran were terminated. All this while Iran kept control over the Strait of Hormuz, which it had already publicly stated it had no plans to ever surrender.

President Trump’s reaction to the Iranian response was not delayed at all, nor was it lengthy. Posting to Truth Social, President Trump pronounced the response “unacceptable.”

Thus ends the latest diplomatic effort to resolve and end this war.

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Meanwhile, Provocations Mounted On Both Sides

While Iran “reviewed” the proposal, questions arose whether the ceasefire was still in effect, as there were reports of strikes coming from both sides:

• In what US Central Command (CENTCOM) identified as blockade enforcement, US naval forces disabled the M/T Sea Star III and the M/T Sevda on May 8.

• Separately, Iranian forces fired on a Chinese cargo vessel near the United Arab Emirates port of Al Jeer. Iran’s choice of targets was nothing if not ironic, given their reliance on Chinese economic assistance—nothing says “Help me, please!” so much like trying to blow up your financial patron’s boat.

  

• Shortly after the attack on the Chinese vessel, Iran reported that a commercial pier near Bandar Abbas had been attacked.

  

• In a separate incident, the US Navy sent three destroyers through the Strait. While Iranian forces fired on them, the ships responded in kind and very successfully, according to President Trump posting on Truth Social:

  

While the ceasefire was “technically” still in effect, outside observers might be forgiven for thinking that it had broken down, and that hostilities were ramping up once more.

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More War?

With the Iranian response labeled completely unacceptable by President Trump, and there having already been an escalating sequence of tit-for-tat provocations between the US and Iran, the answer to the inevitable question “what next?” appears to have already been answered: there will be more war.

Within some analyses, that there would be more war has been largely inevitable. Even as Majlis Speaker Mohammed Bagher Ghalibaf has sought to thread the diplomatic needle between preserving the regime’s objectives and negotiating and end to the conflict, he is seen as being opposed—and largely blocked—by IRGC commander Ahmed Vahidi.

Yet he faces stiff opposition. “There’s a power struggle within the irgc,” says another Iran-watcher. The speaker’s most fearsome opponent is Ahmad Vahidi. A career soldier, former defence minister and the current head of the IRGC, he represents the hardliners. “He’s an end-of-days man,” says a former Israeli intelligence officer who worked on Iran, a reference to the Shia millenarianism that some reckon guides him. Mr Vahidi believes America will only tighten the noose. Iran should resist while it can. The current economic hardship, he argues, could spark renewed unrest of the sort seen in January. “They’re not sure they can survive another round of protests,” says a manufacturer. War, by contrast, would keep people indoors—and could rally some behind the regime.

If the hawks prevail, escalation will follow. Local commanders would revert to the tactics adopted at the war’s outset, reinstating a prepared list of targets. Strikes on tankers could resume, keeping Hormuz closed. They might also do the same in the Red Sea. American warships and Gulf cities could come under more fire.

Nor has President Trump’s objectives for the war shifted. The “red lines” he drew at the very start of the conflict have remained America’s “red lines” throughout.

Our objectives are clear.

First, we’re destroying Iran’s missile capabilities, and you see that happening on an hourly basis, and their capacity to produce brand new ones, and pretty good ones they make.

Second, we’re annihilating their navy. We’ve knocked out already 10 ships. They’re at the bottom of the sea.

Third, we’re ensuring that the world’s number one sponsor of terror, can never obtain a nuclear weapon. Never going to have a nuclear weapon. I said that from the beginning. They’re never going to have a nuclear weapon. They were on the road to getting one legitimately through a deal that was signed foolishly by our country.

And finally, we’re ensuring that the Iranian regime cannot continue to arm, fund, and direct terrorist armies outside of their borders.

To that list the only addition has been that Iran must surrender its illicit control over the Strait of Hormuz.

Meanwhile, Iran’s economy is collapsing. There is no speculation on that point, as even Iranian media outlets openly concede as such.

Iran has already begun tapping its wealth reserves just to fund basic necessities for the Iranian people. With traceable oil exports down over 80% since the blockade began, the economic pressure on Iran is immense, pressure that is only going to grow with reports that Iran has already maxed out its oil storage capacities and is having to shut in production wells.

Iranian sources confirm that some shut ins are already happening.

Tehran is proactively reducing crude output in a move to stay ahead of capacity limits rather than waiting for tanks to fill completely, according to the senior official, who asked not to be identified because the information is sensitive. And engineers have learned how to idle wells without lasting damage and restart them quickly, officials say, after years of sanctions and shutdowns pushed the country’s oil industry through cycles of disruption.

“We have enough expertise and experience,” said Hamid Hosseini, a spokesman for the Iranian Oil, Gas and Petrochemical Products Exporters’ Association. “We’re not worried.”

While Iran has shut in production wells before, back in 2020, when the wells were brought back on line, it was with a loss of over 400,000bbl/d.

That Iran is understandably reluctant to proceed more quickly with shut ins than it absolutely must may be the cause of an oil slick detected recently off of Kharg Island, site of Iran’s primary oil terminal. If storage capacity is reached, crude may have simply spilled into the ocean—or was deliberately dumped.

Exactly how long Iran can endure this state of affairs is inherently problematic. While many independent analysts have assessed that Iran’s capacities to withstand the blockade run out after about a month—a time frame that has already largely passed—there have been contrarian assessments leaked from CIA sources suggesting that Iran has a far greater capacity to absorb the economic hits.

These assessments indicate that Iran has not been damaged as much by Operation Epic Fury as President Trump has maintained, and that the economic pressures of Operation Economic Fury are less than President Trump has maintained.

We must be cautious with such assessments, and not merely because they are obvious leaks to corporate media, which automatically implies an agenda of undermining the Trump Administration on Iran. As I have covered in previous articles, there are numerous open source assessments that Iran’s storage capacities and ability to endure without the influx of oil revenues exports had been providing are extremely limited. Part of Iran’s seeking land routes from the Pakistani port of Karachi to Iran is the economic strain the country is enduring.

At the same time, that oil flows from the Persian Gulf are disrupted is carrying significant economic risks for the world’s economies.

In an interview with CNBC, Maersk CEO Vincent Clerc warned on Friday that if oil flows were not quickly restored there would be significant price shocks across a number of goods, as shipping companies begin passing along the costs of elevated bunker fuel prices.

“What this this energy shock is going to mean is about $500 million of extra costs per month for as long as the oil remains around in the in the $100 per barrel neighborhood, that is significant,” Clerc told CNBC. “And there is so much we can do on reducing costs, but there is a lot we need to do on passing on these costs to customers, because it’s such a massive cost increase that we can’t shoulder it.”

We cannot dismiss Clerc’s warning out of hand, because it is already certain that Persian Gulf oil production is significantly reduced, with Saudi Arabia, the UAE, and Iraq all reporting major production cuts in March.

The disruptions are also impacting refined products which normally flow from the Persian Gulf, most notably aviation fuel.

Global shipments of jet fuel have fallen to their lowest level on record, as the blockage to the Strait of Hormuz threatens to suffocate supply to the world’s airlines.

Under 2.3m tonnes of jet fuel and kerosene were shipped around the world last week, according to analysts at Kpler, marking the lowest level since records began in 2017.

With the summer travel season rapidly approaching, jet fuel shortages could create significant increases in the costs of vacation travel, and a corresponding destruction of travel demand, as consumer respond to the expected price shock in air fares.

Looking farther ahead, food price concerns are also growing, as the increased costs for petroleum and natural gas impact fertilizer production and fertilizer costs.

The war in the Gulf connects to higher prices on a baguette via three slow steps. Gas becomes fertilizer. Fertilizer feeds crops. Crops become food. Each takes weeks; the full cycle lasts months.

“Most of the food currently on supermarket shelves was produced using inputs that were purchased or contracted before the crisis fully unfolded,” said David Laborde, who runs the Agrifood Economics Division at the U.N’s Food and Agriculture Organization. “The current stability mainly reflects timing, not immunity.”

Europe produces its own nitrogen fertilizer, but makes it from imported gas. When Gulf disruption pushes gas prices up, European-made fertilizer gets more expensive too.

Even in the US, farmers are experiencing significant and sudden increases in fertilizer prices, as the disruption of Persian Gulf oil flows raises petroleum prices globally.

That energy prices have risen dramatically since the start of the war is empirically obvious—as is that the prices are falling more significantly on Europe than on the US.

Even global diesel prices are up over 60% since the start of the war—and that will exacerbate the transportation cost shocks described by Vincent Clerc in maritime shipping.

Price shocks in essential manufacturing inputs is already creating a stagflation crisis in China.

If this war continues, stagflation is likely to spread through the rest of the world’s economies, including that of the United States.

As of this writing, we have not yet seen the April Consumer Price Index data—that is not due until May 13—but we are sure to see additional energy price inflation. The question will be if energy price inflation is having a contagion effect and pushing up other prices as well. If that should be the case, the US will be well on its way to having a stagflation crisis not unlike that of the 1970s, and driven by largely the same forces: disruption of global oil supplies.

It seems unavoidable that, at this point, there will be more war, and it is certain that the closure of the Strait of Hormuz will continue for at least a little while longer. It is therefore certain that the world, and not just Iran, will endure the economic ramifications of the war.

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What Is The Alternative?

The grand question over everything taking place in the Persian Gulf is “what is the alternative?”

Is this war the right choice at the right time?

Is there an unexplored diplomatic possibility that needs to be considered?

Certainly the leaders of Europe have talked at length about the need for talks, and Pakistan has sought with diligence and industry to play mediator and bringing about talks between Iran and the US.

If there is a legitimate diplomatic option, the US would do well to consider it.

At the same time there is no getting around the reality that Iran’s actions in the Strait of Hormuz are a violation of every freedom of navigation principle there is, principles which predate even the UN Convention on the Law of the Sea, which clearly forbids Iran’s actions.

There is no getting around the reality that Iran’s nuclear weapons program has been an ongoing violation of Iran’s obligations under the Nuclear Non-Proliferation Treaty, which Iran signed and ratified.

There is no getting around the reality that the IRGC-led Khamenei Regime has doubled down on these violations of international law, even proposing that all sanctions be lifted while Iran continues to violate both UNCLOS and NPT.

There have been multiple diplomatic overtures extended to Iran, and in each one Iran has rejected what have been fundamental and essential positions from the United States: surrender illegal control of the Strait, dismantle the country’s network of support to a variety of Islamist terrorist militias—Hezbollah in Lebanon, Hamas in Gaza, the Houthis in Yemen—and surrender the entirety of the nuclear weapons program.

These are positions the IRGC has not wavered on, and they are positions the Trump Administration negotiators have not wavered on.

With neither side willing to back down on at least these points, is it possible to resolve this conflict by any other than force of arms? That seems unlikely.

The IRGC has for years been pursuing a course which contravenes established norms of international law and treaties Iran itself has signed. There is no serious debate to be had on that point. The lawlessness of the IRGC was the catalyst to last year’s Twelve Day War and it was the catalyst to Operation Epic Fury.

That lawlessness makes war with Iran more of an inevitability than an option. So long as the IRGC is determined to follow a course of shredding international maritime law and UN treaties, the question regarding war with Iran was never an “if”, and always a “when”.

This war has already cost the Iranians much, and will cost them even more. This war has already cost Europe much, and will cost them even more. This war has already cost the US much, and will cost us even more.

As steep as those costs are likely to become, is there any good answer to the question “what is the alternative?”

At present, the answer appears to be “none.” God help us all.

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For April ADP hopped on the BLS bandwagon and printed a blowout National Employment Report showing strong growth across all job sectors, for an aggregate of 109,000 new jobs.

ADP’s Chief Economist Nela Richardson provided her usual optimistic statement for the press release, touting job gains among small businesses.

“Small and large employers are hiring, but we’re seeing softness in the middle,” said Dr. Nela Richardson, chief economist, ADP. “Large companies have resources to deploy, and small ones are the most nimble, both important advantages in a complex labor environment.”

Coming in the second month of a war with Iran that has sent energy prices soaring, that April surpassed March by more than 40,000 jobs is a remarkable report by any measure.

The March figures have subsequently been revised downward, to 61,000.

How strong was the report? The Wall Street consensus was some 10,000 jobs less, and the Trading Economics Forecast was only 8,000 jobs above the March number.

Wall Street was not expecting the ADP report to be this strong.

Coming as it does on the heels of a strong March Job Openings and Labor Turnover Report, and with minimal revisions from March, the ADP report is a strong signal that labor markets in the US are waking up.

Will the April Employment Situation Summary also surpass Wall Street expectations?

With a consensus projection of 73,000 private sector jobs, and a Trading Economics forecast of 83,000 private sector jobs, the stage is certainly set for the “official” monthly jobs report to do exactly that—or provide a crushing disappointment.

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Almost Every Sector Showed Growth

One reason the March JOLTS report deserves serious scrutiny was that it showed job growth in every sector.

The April ADP report very nearly matches that.

While healthcare provided the bulk of the jobs reported, only Professional and Business Services reported a loss of jobs in April.

The ADP report has been showing consistent job growth for several months, with six of the last nine months at 60,000 jobs or more.

Manufacturing showed a welcome increase in jobs, the first such increase on the ADP report since March 2024.

Construction and Mining were also positive on the month, making the ADP report very positive for goods-producing jobs.

Among service-providing sectors, only the Professional and Business Services segment lost jobs in April.

Trade, Transportation, and Utilities reversed a March decline, printing 25,000 jobs.

Leisure and Hospitality, Information, and Finance all showed solid if unremarkable gains.

By far Healthcare showed the biggest increase in jobs, with more than half of the total jobs created for April

As with the March JOLTS report, job gains across all sectors but one signals rising labor demand, and that is a necessary predicate to wage growth.

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New Strength In Goods Producing Jobs

The ADP report has shown positive job growth among service producing jobs for the last nine months. Goods producing job sectors, however, were shedding jobs for most of 2025. 2026 has been a year of new strength for the goods producing job sectors, even as service producing job sectors stayed strong.

That 2026 is a year of recovery for goods producing jobs coincides with the return to expansion for the Institute for Supply Management Manufacturing PMI.

April was also a month of improvement in the S&P Global Manufacturing PMI, which has been printing expansion for several months, but surged to 54.5 from March’s 52.3.

As with the March JOLTS data, the ADP report is consistent with the PMI data showing manufacturing coming out of the gate strong for 2026.

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ADP Report Consistent With Unemployment And Layoff Data

The ISM PMI data are not the only metrics consistent with the ADP jobs report.

The Department of Labor’s unemployment data has been charting a steady decline in initial unemployment claims going back into last fall.

Continuing claims have also been charting a decline since the fall.

The decline in continuing claims especially has been more rapid in recent weeks, a trend which is entirely consistent with the job growth being reported by ADP.

The Job Cut Announcement report from outplacement firm Challenger, Gray, and Christmas also indicates 2026 is a stronger year for jobs than 2025. In the first three months of 2026, only January exceeded 2025 levels for layoffs and job cuts.

These employment reports are independent signals that are consistent with what the ADP report is showing for 2026. We have at least these reports as reason to take the ADP report at face value.

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Not All Other Data Shows Strength

While the ADP report is backed up by a number of independent metrics indicating an improving economic situation, we should not pretend that there are not countervailing signals which present a far less optimistic view of American jobs markets.

The ISM Manufacturing Employment metric has been printing contraction since January 2025.

The ISM Services Employment metric has been more volatile than the ADP data suggests for service-providing jobs.

Nor should we overlook that the Bureau of Labor Statistics unemployment level data indicates that joblessness has been trending up since mid 2023, a long-term trend which has persisted through last month’s Employment Situation Summary.

If overall unemployment levels are rising in this country, then jobs markets are less robust than the ADP report indicates.

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Is The Data Real?

If the ADP report is accurate, American jobs markets have expanded significantly in recent months.

If the ADP report is accurate, labor demand is increasing at a significant pace.

The caveat, of course, is the predicate stated both times: “if the ADP report is accurate.”

Is the ADP report accurate? That revisions to the March report were only 1,000 means the report’s authors at the very least consider the report to be accurate.

The ADP report presents us with the same question as the March JOLTS report: Is the jobs recession coming to an end? The ADP report invites us to reach the same conclusion as that implied by the JOLTS report: yes, the jobs recession is coming to an end.

Could the ADP report be wrong? Absolutely it could be wrong. As with all of the jobs reports, the ADP report is fundamentally a report of estimates and extrapolations. As we have seen with the Employment Situation Summary, the extrapolations themselves can be problematic. If the baseline models upon which the estimates are based are flawed, the reports generated will be flawed.

By the same token, the ADP report could be correct. The baseline models might not be flawed, or might not be egregiously flawed.

This much is certain: The ADP report raises the expectation bar for Friday’s April Employment Situation Summary. After the blowout month the BLS jobs report had in March, that ADP prints a blowout report for April suggests the BLS jobs report will be positively stellar.

Is the jobs recession ending? ADP is telling us that it is.

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The number of job openings was unchanged at 6.9 million in March, the U.S. Bureau of Labor Statistics reported today. Over the month, hires increased to 5.6 million while total separations changed little at 5.4 million. Within separations, both quits (3.2 million) and layoffs and discharges (1.9 million) were little changed.

Corporate media was typically chagrined that the much-touted and supremely meaningless job openings number had actually slipped a little. The metric that does have meaning, however, is the hiring numbers.

Hiring rose significantly, and even though separations rose as well, overall net hiring rose at a pace in keeping with the jobs numbers from the Employment Situation Summary.

Does a strong net hiring number indicate the jobs recession has reached a bottom? Is a turnaround and actual growth in net hiring in the very near future?

With strong net hiring across all sectors, the March JOLTS report gives us good reason to hope so.

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Openings Fell, But Hiring Surged

Corporate media much prefers to see large inflated job openings numbers. It’s not a rational fixation, since roughly half of those so-called job openings are not being filled by anyone. With that fixation, outlets such as Bloomberg were not happy that job openings ticked down slightly in March.

Available positions fell slightly to 6.87 million from a revised 6.92 million in February, according to Bureau of Labor Statistics data released Tuesday.

We can easily see that the emphasis on job openings is exaggerated, just by looking at the JOLTS data from 2021 onward.

Since the COVID Pandemic Panic, job openings have been consistently overstated. At its 2022 peak, the fictitious job openings were more than double actual hiring.

While job openings moved down slightly, when we look at the data since 2021, there is a distinct “bottoming out” of the job openings curve. Hiring and separations also are near the levels they were at in January 2025: 5-5.5 million hires and 5-5.5 million separations.

Job openings, hires, and separations have all trended down since 2022. Through 2025 into 2026, that trend has flattened out considerably, consistent with the data finally having established a floor. The March hiring data is an increase off that floor level.

That is the sort of trend turnaround that would signal the jobs recession that has bedeviled US labor markets since 2023 is at last coming to an end.

Certainly, that is the hope of Navy Federal Credit Union Chief Economist Heather Long.

“Is the hiring recession finally over? There are encouraging signs,” Heather Long, chief economist at Navy Federal Credit Union, wrote in an e-mail.

“The big concern is the war in Iran could halt that much needed progress in the labor market,” she wrote.

What is clear from the data is that net hiring in March was consistent with the growth in payrolls per the Employment Situation Summary.

Given that both reports are produced by the Bureau of Labor Statistics, we should expect some convergence, and might even view that convergence as an indication of statistical bias. At the same time, during last summer the two reports varied significantly, demonstrating that convergence was not a given.

For the past few months, however, the JOLTS and ESS reports have printed very similar results.

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Sectors Advanced In March

Even more encouraging than corporate media and Wall Street “experts” belatedly conceding that the jobs recession has been real is the broad base for the net hiring surge.

Manufacturing, which has been hemorrhaging jobs for over two years, saw a jump in net hiring.

Construction, while printing cooler net hiring than in February, still turned in a fifth straight month of positive net hiring—the first time since October 2024 that has happened.

Trade, Transportation, and Utilities, a major service sector, rebounded from February’s job losses to show net hiring gains.

Professional and Business Services showed continued recovery, printing a fourth consecutive month of positive net hiring.

Healthcare, which has carried more than a few jobs reports, rebounded from a weak February to have a strong March.

Leisure rounded out the service sector also by showing a rebound from a horrible February, with its third best net hiring gains since the start of Trump Administration 2.0.

Every sector of private employment showed some measure of improvement in March. Such breadth in job growth is another reason to consider the possibility the jobs recession is ending. Broad job growth is an actual indicator of robust jobs markets, where hiring is strong everywhere rather than being concentrated in one or two industries.

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