The new Federal Reserve press policy apparently is not to actually answer any questions at all.

Wall Street was not pleased.

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The Producer Price Index for final demand fell 0.3 percent in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.6 percent in May and 1.1 percent in April. (See table A.) On an unadjusted basis, the index for final demand increased 5.5 percent for the 12 months ended in June.

After the broad price declines from the June CPI report, there is less surprise that the PPI print shows something similar. What is surprising, however, is that, unlike headline consumer price inflation, which had been cooling over the past couple of months after an initial spike in March, headline producer price inflation had not cooled.

In May PPI was running hot. In June PPI was running cold.

What should we make of this very large swing in producer prices?

Is this another signal that the mini-stagflation scenario of the past few months has ended even before it could get seriously underway?

Is this a signal that more deflation has yet to come? Possibly. If that is the case the collapse in price supports across the board could mean that a longer term deflationary trend has taken hold, and the United States is heading into another “lost decade” of minimal or no economic growth.

What is the Producer Price Index trying to tell us? That is an excellent question—lets peel back the layers of data to see if we can construct an excellent answer.

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PPI Is Telling Us Prices Are Still Falling—Sort Of

Recognizing that the Producer Price Index broadly serves as a leading indicator for the Consumer Price Index, the most obvious signal we can see in the PPI data is that prices are still falling—sort of.

As the BLS press release noted, headline producer prices dropped 0.3% month on month in June.

However, core producer price inflation went up month on month, from 0.09% to 0.2%

Pulling back to look at producer price inflation year on year, the headline index eased to 5.5%, but core inflation rose from 4.6% to 4.7%.

Unlike consumer prices, producer prices did not fall across the board in June. Some goods and services are still seeing rising producer prices.

The headline PPI index suggests that we will not see significant inflationary pressure in the headline consumer price inflation data for at least the next month or so. With the core CPI print remaining constant year on year and the core PPI print moving up by 0.1pp, we may see some incremental increases in some core prices, even as prices overall trend down.

Energy Price Inflation Is Correcting Itself

In a repeat of the CPI data, the Producer Price Index for Energy dropped month on month by a fairly substantial 6.4%.

With oil prices having dropped throughout the month of June, this really should be no surprise at all.

Although the ceasefire with Iran is now over, declaring that ceasefire and reopening the Strait of Hormuz has proven hugely beneficial to energy prices in the near term.

If we go by just the data, the Producer Price Index for Energy is telling us that energy prices are still correcting, which would indicate we will see further energy price deflation in July within the CPI. However, we must buffer that thought with the reality that the price of oil is rising again, which will curtail whatever further price deflation the PPI appears to forecast for energy products.

We may see some further energy price deflation in July, but with oil having risen over $12/bbl for West Texas Intermediate, we should expect energy price inflation to return.

Food Prices Should Remain Stable

For food prices, the PPI report is quite at odds with the CPI report.

While the CPI data shows food price inflation heating up somewhat in June, the PPI data shows food prices in outright deflation, month on month.

This may be a stabilizing signal. If food prices are rising now, but are on track to fall again next month, overall food prices are neither trending up nor down.

We could be seeing the same balancing act in other subindices. PPI for Goods, for example, saw producer price inflation heating up in April and May, only to drop significantly in March.

Services, on the other hand, actually rebounded into producer price inflation for June, after printing deflation in May.

Considering that core producer price inflation rose slightly in June, we may very well be seeing indications that core consumer price inflation will be moving up over the summer, even as energy prices continue to fall. What we are not seeing are signs of nascent hyperinflation.

Intermediate Demand Is Cause For Concern

As a general rule, we tend to look at lower prices with a fair bit of enthusiasm. That is natural economic behavior—we always prefer to pay less.

However, there are times when a price drop is a warning sign. The abrupt shift into deflation within the Producer Price Index for Intermediate Demand is one of those times.

Intermediate demand had been heating up since last fall—well before Operation Epic Fury and the war with Iran. Across the entire supply chain, for intermediate demand stages 1 through 4, in June rising prices were abruptly replaced with falling prices.

Is the drop in intermediate demand prices an outlier rather than a trend reversal? We won’t know that until we see next month’s data. As these shifts are month on month, we could easily be looking at a series of one-off price decreases.

We could also be looking at a signal of a slowing economy. If deflation continues within Intermediate Demand prices, we will definitely be looking at a slowing economy. Regardless of what prices do, the outcomes we do not want to see is a slowing economy or a recession.

Intermediate Demand prices suddenly losing altitude may be a recession warning, making the June drop a reason to be concerned.

War With Iran Still The Principal Factor

What seems certain is that the war with Iran, along with its potential for disrupting Persian Gulf oil flows, is going to have an outsized impact on prices for the next few months.

One reason is the uneven and somewhat problematic nature of traffic volumes through the Strait of Hormuz.

While President Trump insists the strategic waterway is open, and without tolls, traffic levels suggest the rest of the world is not entirely assured of the Strait’s safety. As the chairman of the Japan Foreign Trade Council Masahiro Okafuji said bluntly during a press conference, the Strait of Hormuz is “dangerous”.

There is an equally blunt rejoinder, however: the Strait may be dangerous, but avoiding it is costly.

Renewed re-routing of the shipping lanes around the Cape of Good Hope on Africa’s southern tip would hike transportation costs by over 30%, according to Okafuji, who is also chief executive at major Japanese trading house Itochu Corporation.

Following the re-escalation in regional hostilities in recent days, the Joint Maritime Information Center (JMIC) reaffirmed on Tuesday its regional threat level for the Strait of Hormuz at “severe”, which it had raised last week after the first signs emerged of the collapse of the U.S.-Iran ceasefire.

If the world’s freight carriers are doing all they can to avoid sending cargo vessels anywhere near the Persian Gulf, shipping costs are going to be rising for at least the next month or so.

If there should be another ceasefire, so that sailing through the Strait does not seem all that dangerous, we should see traffic levels through the Strait rebound again.

Even with another ceasefire, however, we are not likely to see traffic in the Strait return to the status quo ante right away. After the Memorandum of Understanding was signed, some ships began transiting the Strait once more, but the levels were not at all what they had been before the war with Iran. Signing a new MoU will not make ships any more eager to transit the Strait.

The economic reality is that the uncertainties of the war with Iran are equally uncertainties about prices and the global economy. As we cannot say with certainty how much longer the war with Iran will continue, we cannot say with certainty what is to become of traffic through the Strait of Hormuz. We cannot say with certainty if oil prices will trend back towards $100/bbl. We cannot say if Persian Gulf states will be able to reopen their oil fields or if production will have to be shut in.

If we cannot say with certainty what is likely to happen to fully one-fifth of the world’s oil supply, we cannot say with certainty what needs to happen with oil prices, as well as fuel prices and the prices of other refined petroleum products.

Last month’s ceasefire brought oil prices down by a very wide margin very abruptly. That lack of inflationary pressure has produced at least one month where prices drop because the anticipated supports for any given price or price level have moved lower.

However, the ceasefire is over. Iran is attacking other Persian Gulf states and the US is attacking Iran. The forces which brought oil prices down are already pushing them back up again.

What are we to make of the June Producer Price Index Summary? As with the Consumer Price Index Summary, the report is a one-off report of lower prices. Barring an outbreak of peace in the Middle East, we will not see a second drop in producer prices any time soon.

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Most prices fell last month. Those sectors not in outright deflation month on month showed significant disinflation.

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.4 percent on a seasonally adjusted basis in June after rising 0.5 percent in May, the U.S. Bureau of Labor Statistics reported today. This decline in the all items index was the largest 1-month decrease since April 2020 when it fell 0.8 percent. Over the last 12 months, the all items index increased 3.5 percent before seasonal adjustment.

Headline inflation, core inflation, energy, and both durable and non-durable goods all printed deflation month on month in June. Last month was the month when literally all the prices fell.

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Wall Street Was Expecting Good News, But Not This Good

The drop in prices across the board was unexpected. Wall Street had projected 3.8% year on year headline inflation, and the Trading Economics Forecast had been 3.9%.

The CPI Summary printed headline inflation at 3.5% year on year.

Core inflation was anticipated to be 2.9% year on year, the same yearly inflation rate as in May.

The CPI Summary printed core inflation at 2.6% year on year.

Even the Cleveland Fed’s inflation nowcast had projected higher numbers than what was reported yesterday by the BLS.

Wall Street and corporate media “experts” were anticipating good news in the June inflation report, but they were not expecting the news to be this good.

Economists forecast that falling gas prices will turn the June Consumer Price Index negative, but that doesn’t mean the coast is clear for inflation just yet. Stripping out volatile food and energy prices should show inflation remains well above the Federal Reserve’s target on an annual basis, according to economists.

Still, economists say the good news is that inflation pressures have at least stabilized, and the surge of oil prices earlier in 2026 does not appear to have spread beyond the most energy-sensitive portions of the economy. The question is how other variables in the inflation picture may improve.

Naturally, the enthusiasm over unequivocal economic good news produced a bit of gaslighting as well—why confine oneself to facts when there is the opportunity for propaganda? The prospect of outright deflation in the CPI report led to a few exaggerated headlines:

In reality, the last time the CPI report printed outright deflation was in June of 2024.

Not even Common Core Math can squeeze six years in between then and now.

Wall Street expected good news, and Wall Street got even better news. That does not happen very often.

Deflation Month On Month, Disinflation Year On Year

Month on month, the headline price drop was a fairly substantial 0.4%—the largest decline in headline prices since the COVID Pandemic Panic in 2020, when prices fell 0.8% month on month

Core inflation mostly held steady, slipping a miniscule 0.02% month on month.

The month on month price decline also produced major disinflation year on year, with headline inflation printing at 3.5%.

Core inflation cooled to 2.6%.

The price drop very nearly erased all year on year inflation for the past three months. At 3.5% year on year inflation is above where it was in March of this year, but it is substantially below where the inflation numbers were just in April.

Energy Prices Way Down

While energy price deflation has been a recurring theme in the CPI report, June was the first month in quite a while when there was a significant decline in energy prices.

With a decline of 5.7% month on month, energy prices captured the largest month on month drop since the COVID Pandemic Panic.

As might be expected from such a large drop, virtually all energy price index components showed deflation for June.

Only piped natural gas showed any increase in prices.

The other volatile measure in headline inflation is food. Food was the one portion of consumer prices where the month on month inflation rate actually increased.

While food price inflation increased month on month in June, that rise did not even come close to offsetting the declines in energy prices.

Durable Goods Prices Continued To Drop

The only reason durable goods prices falling in June is not by itself a major news item is because durable goods have been dropping month on month since last fall.

Far more notable is that nondurable goods printed deflation month on month as well.

Even before prices started rising in March, nondurable goods prices had been trending higher. Yesterday’s CPI print was the first decline since January, and the largest decline since the COVID Pandemic Panic.

When we compare energy prices to nondurable goods prices, we can easily see why nondurable goods are down:

Energy prices have driven nearly all the recent change in nondurable goods prices. Energy has been driving nondurable goods prices up, and in June energy drove nondurable goods prices down.

Even services printed a sliver of deflation in June.

While nowhere near as large as the declines during the Pandemic Panic, that service prices dropped at all is noteworthy; service prices have been trending up in recent months.

The only part of core inflation which stayed positive for June was shelter price inflation.

However, at .13% month on month, housing prices printed the smallest month on month increase since October of 2022.

Even the forward-looking Zillow Observed Rent Index (ZORI) showed some cooling in June.

There was not a single segment of the CPI data set where there was not at least significant disinflation, with most segments printing outright deflation.

Stagflation Never Emerged

Perhaps most encouraging in the June price drop is that the energy price and supply shock from March never really translated into a stagflation crisis.

While energy prices rose dramatically beginning in March, that price rise never moved beyond energy prices. If we index the segments of the CPI data set to January of 2025, we quickly see that the surge in energy prices had little observable effect on other price segments.

Nor do we see the energy price surge showing any influence on other prices if we index from 2021 onward.

The deflation among durable goods is a trend extending as far back as January 2022. The general upward trends in food and service prices has not been impacted much if at all by energy prices. Only nondurable goods shows any influence from energy prices at all, but that is due to energy prices being also a subset of nondurable goods. Outside of energy prices, nondurable goods showed no inflationary trend.

While there is always a concern that a supply shock can produce significant consumer price inflation while also boosting unemployment, the classic toxic brew of stagflation that defined consumer price trends during the 1970s, that scenario simply never materialized.

Not Going To Last

There is no mystery why energy prices are in deflation for June: energy prices on the open market dropped in June, after their spring surge.

Fuel prices followed suit, with both diesel and gasoline prices at the pump heading south.

However, with the resumption of hostilities between the US and Iran over the Strait of Hormuz, oil prices have already begun to track upwards once again.

Gas prices quickly followed.

Energy prices fell in June, and that fall defined consumer price inflation patterns for the month. Energy prices have started rising since the end of June; that rise is sure to define consumer price inflation patterns for July.

The drop in prices for June is a welcome shift after the energy price surges of the past few months, but the one thing we already know is that it will not be repeated in July. There is no trend reversal in play for consumer prices, merely an abrupt and temporary cooling of consumer price inflation.

That the June inflation print won’t be repeated for July is perhaps the most encouraging part of the Consumer Price Index Summary. As bad as persistently high inflation is, and as economically damaging as it can be, persistent deflation is a far more severe problem, as it blocks all economic growth. Outside of durable goods, the US economy has not been seeing persistent price deflation. While there is room for debate about how much or how well the US economy is actually growing, one fundamental reality of the US economy is that it is growing—at a time when that cannot be said of other major economies such as China.

June was the month when all the prices fell in the US. It was the month when much of the energy price and supply shock that first hit the economy in March largely reversed.

July will not be a repeat of that price drop. July will also not be a repeat of March, even with energy prices moving up once more. We will see some further inflation increases at least for the summer months, but at present a new hyperinflation cycle such 2021-2022, or a 1970s-style stagflation crisis as was feared back in March, is not in the offing.

That outlook could change. Every factor that made stagflation a real possibility over the past few months is still present. Persian Gulf oil flows are still at risk of disruption. Strategic oil reserve releases are still at risk of not being able to buffer that disruption. The war with Iran shows no sign of ending quickly.

The June inflation report erased much of what could easily have become a severe stagflation crisis in the US. It did not erase the forces that would have caused that stagflation crisis.

The June inflation report was a one-time shot of good inflation news. Enjoy it while it lasts.

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The common thread in both jobs reports: Job growth slowed in June. ADP reported 98,000 jobs created, down from 122,000 jobs in May.

The BLS jobs report showed an even greater cooling of labor markets, with job growth slowing to 57,000.

Both total nonfarm payroll employment (+57,000) and the unemployment rate (4.2 percent) changed little in June, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, social assistance, and health care. Leisure and hospitality lost jobs.

Both numbers were well below Wall Street as well as Trading Economics projections. Wall Street had anticipated ADP would report 113,000 jobs created in June.

Wall Street had similar expectations for the BLS jobs report at 110,000 jobs.

The job growth was there, just much less of it than was forecast.

Neither the ADP nor the BLS jobs reports are, on the surface, particularly bad jobs reports. Both reports are considerably cooler snapshots of US labor markets than we have seen in recent months.

While the headline numbers for both reports are not altogether bad numbers, when we delve into the details we quickly see that labor stumbled in June, with a number of sectors shedding jobs rather than adding them.

The June job reports are not altogether bad reports, but the strength of the overall jobs numbers cannot conceal the reality of continuing weaknesses within US labor markets.

We may not be backsliding into a jobs recession…yet. We are still very much at risk of a return to jobs recession, and without a lot of advance warning.

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May JOLTS Was Right About Downward Revisions

One the more significant cautionary notes found in the May JOLTS data was the warning signal that the Employment Situation Summary may be about to experience significant downward revisions.

That warning signal proved to be prescient, for the June ESS had major downward revisions for both April and May.

The change in total nonfarm payroll employment for April was revised down by 31,000, from +179,000 to +148,000, and the change for May was revised down by 43,000, from +172,000 to +129,000. With these revisions, employment in April and May combined is 74,000 lower than previously reported.

This abrupt elimination of 74,000 previously reported jobs erased last month’s achievement of year to date job revisions printing positive.

Total year to date revisions to the jobs data is now down 8,000 jobs.

The June jobs report gives us another warning signal as well: signs that Lou Costello Labor Math is still lurking within the overall data set, as the Employment Level from the Household Survey once again broke with from the All Employees metrics within the Establishment Survey.

Given that both the Household and Establishment Surveys are supposed to be measuring the same overall data—the American labor force—we should expect similar growth trends within both surveys. In June the Employment Level dipped again in a clear divergence from the All Employees trends.

When the two surveys are not reporting similar trends, we must be cautious about what to make of the data.

Sector Results Were Uneven

ADP’s Chief Economist Dr. Nela Richardson summed up the sector results for both the ADP and BLS data sets succinctly as a slowdown in job growth.

The pace of hiring is telling a story of both supply and demand. We know it’s taking people longer to find work, but there also are signs of labor supply constraints in certain industries. For now, the overall effect is a slowdown in job creation.

While the headline numbers were not bad—the ADP headline number would have been quite good were it not a climbdown from May’s much stronger figure—they obscure the weakness reemerging in several sectors. Several sectors lost jobs in June, according to the ESS.

ADP was more optimistic, although there is still a clear cooling trend in the data.

The BLS data for manufacturing was again one of the brighter spots in the ESS report. Although the downward revisions wiped out the past two months’ positive job numbers for the manufacturing sector, the June data still showed job growth for the sector.

ADP showed manufacturing job growth gaining steam in June.

The ESS print shows Leisure as the worst performing sector in June, shedding a shocking 61,000 jobs.

From the revised May figure of 40,000 jobs created, in June Leisure job growth suffered a 100,000-plus shift from job creation to job destruction.

ADP tells a different, more muted, job growth story for the Leisure sector, printing job growth of 2,000 jobs in June.

Leisure job growth cooled in June, but it did not go into the deep freeze reported on the ESS.

The ESS and ADP reports also differed in jobs numbers for Information as well as Financials Services. In June ESS printed 0 job growth for Finance and 9,000 jobs lost for Information. ADP reported 14,000 jobs for Finance and 9,000 for Information.

One sector were the ESS and ADP data largely agree is Mining, which the ADP report prints as losing 5,000 jobs, and the ESS printing job loss of 4,000.

Both the ESS and the ADP reports show Healthcare returning to its status as the dominant sector for job growth, with the ESS printing 69,000 jobs in June and ADP printing 48,000 jobs.

Where the reports differ on Healthcare is ADP shows the job growth cooling in recent months, while the ESS report shows Healthcare having something of a rebound in June.

Overall, while both jobs report show job growth cooling in June, the ESS data is the more pessimistic not only in showing less job growth, but also in a cooling trend from peak job growth in March. The ADP data shows stronger job growth as well as job growth at a peak in May before cooling in June.

The one aspect of job creation for the US where the reports are clearly in agreement is that job growth for June was more uneven than was reported in April or May—although with revisions the Employment Situation Summary is proving to have been more uneven than originally reported, to the surprise of exactly no one (at least, no one who follows my work!).

The ESS in particular has snatched part of the employment rug out from under everyone’s feet, taking back a substantial portion of the glowing job growth narrative of the past two months. We still have job growth, we still have manufacturing job growth, but we have quite a bit less than we have been told in both April and May.

Employment Level Declined Again

A major warning signal coming from the Employment Situation Summary is the decline in the overall Employment Level, which declined by some 507,000 individuals in June.

May apparently was a brief hiatus from a decline in overall employment from a December 2025 peak.

If we look at just the Employment Level data from the ESS’ Household Survey, we would see employment declining throughout 2026 to date, with only last month showing any respite from the contraction in the employed labor force.

The Employment-Population Ratio shows a much longer-term decline, beginning back at the end of 2023.

For all the reports of job growth in the ESS’ Establishment Survey data, the Household Survey continues to tell a tale of fewer and fewer people working over time, and a smaller segment of the population.

The Establishment Survey data might spin an optimistic narrative of job growth and jobs recovery within the US economy, but the Household Survey is challenging the jobs recovery narrative.

Declining Joblessness?

Despite the grim outlook on the nation’s overall employment level, unemployment actually dropped in June, in both the official and “real” unemployment rate metrics.

Both gauges of unemployment fell by approximately a tenth of a percentage point. The official unemployment rate fell from 4.3% to 4.2% in June. The real unemployment rate, still higher as I include with the unemployed people those not in the labor force but who want a job now in calculating that percentage, dropped a little bit more, from 7.61% to 7.45%.

Looking at the reported numbers of unemployed individuals, official unemployment for June declined in this country by 213,000 people.

Even the number of people not in the labor force but who want a job now dropped in June by 142,000.

Paradoxically, even as the Household Survey shows fewer people working, it also shows fewer people not working but still looking for work.

However, while the cohorts of people not working but looking for work declined, the overall number of people not in the labor force rose in June, surging by 832,000.

These are curious trends, and disturbing trends. Taken as a whole they suggest that people who lose their jobs are, in increasing numbers, simply giving up on working.

That is not a healthy trend for any economy. Is the United States seeing a labor phenomenon similar to the “lying flat” trend among younger Chinese workers? The data tells us that may be exactly what is happening.

Wage Growth Disappoints Overall

Paychecks proved another disappointment in the June ESS. While wage growth is still occurring, in June it appears to have continued the recent trend of losing ground to inflation once again.

We have yet to see the June CPI print, but unless it flatlines for the month, wage growth will still prove to have been less than inflation.

When wages can't keep up inflation becomes a major economic concern as well as a political one. With less money to spend relative to rising prices, workers’ overall consumption is restrained, and that means economic growth is constrained.

Since the start of Operation Epic Fury and the war with Iran, wages have not kept pace with inflation. That does not augur well for overall consumption in the second quarter. With less real income, people overall have less means for consumption, which will push down economic growth in this country.

In another demonstration of how uneven the June jobs data is, the changes in nominal pay became more highly volatile during the month.

Curiously, or perhaps a reflection of the broader implications of shifting job growth numbers among sectors, the sectors who lost jobs showed the most wage gain, while the sectors showing job growth also printed slower wage growth.

Strictly speaking, wages are the “price” of labor. If labor demand is falling in a particular sector, as evidenced by job loss for the month, then we would expect to see slower wage growth as well.

In the real world, wages are a good deal less elastic. It is quite possible the shifts in wage growth are at least in some measure a direct consequence of May’s job growth numbers.

Continuing Jobs Recovery Or Slide Back Into Jobs Recession?

The overarching question surround the jobs data is whether or not we are seeing a continuing jobs recovery, or seeing labor markets in the US slipping back into recession?

While the June jobs data shows a slowdown in job growth, it still shows job growth. Relative to prior months, the June data still shows fairly robust jobs growth. Before March, an ESS jobs print of 57,000 jobs would have been unanimously viewed as a strong jobs report. We would have said the same thing about an ADP print of 98,000 jobs for the month.

Even after the robust job increases of April and May, both the ADP and ESS reports are still respectable reports showing in the aggregate respectable job growth.

Yet the data remains troubling. Any month where the Household Survey data diverges from the Establishment Survey data is a month where we must take all the data with an extra large grain of salt, as Lou Costello Labor Math means the overall numbers do not add up.

June was a month where the Household Survey diverged from the Establishment Survey. The numbers do not add up.

As robust as job growth numbers have been recently, wage growth remains a disappointment, as rising inflation is overwhelming increases in workers’ paychecks.

Are we seeing a continuing jobs recovery, or are we seeing labor markets in the US slipping back into recession?

On the strength of just the June data, it would be premature to call an end to the nascent jobs recovery we have seen over the past few months. The sector level numbers are in many sectors a disappointment, but other sectors did very well, more than compensating for job losses elsewhere. Wage growth is again a disappointment, but largely because of rising inflation pressures undercutting wage gains.

At the same time, the jobs data is warning us that all is far from well in US labor markets. The jobs data is telling us that the employed labor force is declining, and that workers as a percentage of the overall population are declining. The jobs data is indicating that if workers leave the labor force, they are giving up on working altogether.

Are workers choosing “lying flat” over searching for a job? That is certainly one interpretation of the data. If we see similar shifts among the civilian labor force and those no longer in it, we may have to pay particular attention to that interpretation.

The June jobs data shows cooler job growth than in May, by a wide margin. On just about every metric, June was a worse month for jobs than May.

The June jobs numbers are technically “not bad”, but the June jobs reports make it clear that labor stumbled. That’s never a good shift in the narrative, and if the numbers do not move back in the direction of more robust job growth over the coming months, it could mean that the jobs recovery is already petering out, and a jobs recession is coming back into the picture.

A return to jobs recession is of course a bad thing, and that would make the June jobs reports bad reports. We are not there yet, but we have moved away from where we can say the reports are unambiguously good reports.

Labor stumbled in June. Hopefully labor stumbles only in June.

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The number of job openings was unchanged at 7.6 million in May, the U.S. Bureau of Labor Statistics reported today. Hires were unchanged at 5.2 million, while total separations changed little at 5.1 million. Within separations, quits (3.1 million) changed little, while layoffs and discharges (1.7 million) were unchanged.

If we take the JOLTS report at face value, job markets in this country hardly change ever.

My advice: do not take the JOLTS report at face value.

On the surface, the JOLTS report appears strong, with job openings printing well above Wall Street projections, and even above Trading Economics more optimistic forecast.

What that seemingly robust job opening number obscures is the significant drop in private net hiring during the month of May.

What that seemingly robust job opening number obscures is the rise in separations during the month of May.

What that seemingly robust job opening number obscures is the fact that net hiring is significantly less in each job sector than the change in the All Employees data from the Employment Situation Summary. While not proof positive, the weak JOLTS net hiring is a warning signal there may be a major downward revision to the All Employees data in the near future.

For all the corporate media hooplah over job openings, the weak net hiring data suggests the May JOLTS report may be much ado over not very much.

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Corporate Media Loves Job Openings, All But Ignores Net Hiring

The number of new job openings is indisputably an optimistic number when it comes to jobs in this country. An employer posting a job opening presumably is a company hoping to expand its payroll, or at least sustain it.

When that job opening does not soon translate into actual hiring, the job opening might as well not even exist.

The Associated Press, as is the case with nearly all corporate media, ignores this simple reality in favor of pushing Wall Street’s preferred narrative that job openings tell the tale on US job markets. We can see that much just in their headline regarding the preferred narrative.

One has to get to the fourth paragraph before the AP report acknowledges that private net hiring is anemic at best.

Employers are advertising openings, but they aren’t actually doing much hiring. Gross hiring — before counting people who lost or quit their jobs — dipped to 5.17 million in May from 5.26 million in April. When the job market was booming from mid-2021 to mid-2023 after COVID-19 lockdowns, gross monthly hiring regularly topped 6 million.

Reuters buried the possibility the JOLTS report is signalling a downward revision on May jobs in the bottom half of its reporting on the BLS release.

“We were surprised to see the total hiring rate unchanged and the private hiring rate decline again in May despite stronger May job growth,” said Veronica Clark, an economist at Citigroup. “This could mean possible revisions lower to May data or weaker net job growth could reflect actions taken in the second half of May. This would suggest softer June employment.”

CNN, still the Most Busted Name In Fake News, once again lived down to its reputation by ignoring the drop in net hiring. Their take extrapolated solely from the job opening numbers to pronounce US jobs markets are still very robust.

“The hiring recession is over, and we are starting to see more industries look for workers again, and that’s really good news,” Heather Long, chief economist at Navy Federal Credit Union, told CNN in an interview Tuesday.

With the May Employment Situation Summary being the third consecutive strong jobs report, even I have considered the possibility that the jobs recession is now over.

However, such speculation should not blind us to the reality that a drop in net hiring on the JOLTS report is a signal that perhaps the jobs recession is not quite over. The JOLTS report is a signal we should not blithely ignore.

Job Openings Still Not Real

As wonderful as a high job openings number sounds—and 7.6 million job openings absolutely sounds wonderful and optimistic—the unalterable reality of the data is those job openings are not translating into actual hiring. We can see that just from the headline data itself.

What is frequently ignored is that the job openings data has printed well above hiring and separations ever since the start of the Biden Reign of Error, which is a marked change from pre-Pandemic Panic data.

If we strip away the job openings data, the hiring and separations data loses quite a bit of its luster.

Hiring and separations have been more volatile in recent months, but the longer term trend since the start of the Trump Administration 2.0 in January 2025 is still slightly down. March was the strongest hiring period in that time, but it comes on the heels of the worst hiring period, which was February.

As optimistic as 7.6 million job openings sounds, the reality is that net hiring is still not even attempting to fill that many openings, rendering most of them effectively unreal.

Net Hiring Declined Overall

One undeniable bright spot in the JOLTS report was that Manufacturing held its own, once again printing 10,000 net hires in May.

Leisure and Hospitality rebounded in May, with its net hiring of 47,000 very nearly equaling its March level.

Professional and Business Services had perhaps the best results, as its net hiring of 37,000 was its best result since April of 2025.

Construction, on the other hand, shed jobs in May according to the JOLTS report.

Healthcare also did not fare well on the May JOLTS report, shedding jobs in what has been a steady decline since January 2026.

Net Hiring for Trade Transportation and Utilities (TTU) simply vanished for May.

TTU shed jobs throughout most of 2025, and April was the first time since the start of Trump Administration 2.0 that TTU net hiring printed consecutive months of job growth.

Taken together, net hiring across all private sectors plunged from 173,000 jobs in April to just 34,000 jobs in May.

With the Employment Situation Summary having printed private sector job growth of 120,000 jobs in May, the JOLTS report is quite a bit less optimistic. The disparity between the ESS and JOLTS reports—86,000 jobs—is the largest such gap since February 2025.

There are good reasons to fear a major downward revision coming to the Employment Situation Summary data. Those same reasons also warn us the jobs recession perhaps is not quite over after all.

We do not want to abandon the jobs recovery narrative on the basis of one weak report in one month, just as we would not want to declare a jobs recovery on the basis of one strong report in one month. Still, we do well to be mindful of the possibility the jobs recovery was just a flash in the pan.

Openings Are The Least Important Data

Contrary to what Wall Street insists and what corporate media promotes, the job openings data itself is the least important data set in the entire JOLTS report.

When hiring responds to job openings, that data can be a useful leading indicator of where hiring might be heading. The data shows that, since the COVID Pandemic Panic of 2020 especially, hiring has not responded to job openings. Even worse for the job openings data is the reality that, since late 2014, job openings have not only exceeded hiring and separations, but that gap has grown steadily wider.

Perhaps most damning of all for the job openings data is that, from 2001 through 2014, the job openings number was consistently below hiring and separations.

The simple reality of job openings is that not a single job opening has economic significance until it is filled.

A job opening is not an expansion of payroll—a paycheck is.

A job opening is not a reduction in unemployment—a new hire is.

In the May JOLTS report, the least important number rose, while the most important number fell.

That is a warning sign. The data is reminding us that, for all the positive job growth data over the past few months, much about US labor markets remains unwell and unresolved.

The May JOLTS report is not a horrible report. Arguably it is not even a bad report.

It is a report that printed net hiring of 34,000 in May. That is still job growth, and that is very much a good thing, but 34,000 is quite the climbdown from 173,000.

That cooling off to the tune of 139,000 jobs not filled precludes the possibility the May JOLTS report is an indisputably good report.

There is some good in the May JOLTS report, but there is considerable bad as well.

Pay attention to both.

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From the preceding month, the PCE price index for May increased 0.4 percent. Excluding food and energy, the PCE price index increased 0.3 percent.

From the same month one year ago, the PCE price index for May increased 4.1 percent. Excluding food and energy, the PCE price index increased 3.4 percent from one year ago.

We know that prices are rising.

We even know why prices are rising: an oil price and supply shock after Iran illegally closed the Strait of Hormuz during the hopefully-ended war between the US and Iran.

What we do not know is how much more inflation are we likely to see. We also do not know how impactful renewed inflation will eventually be.

Corporate media continues to fret about inflation moving higher, and for the usual propaganda reasons. What corporate media overlooks is that there are signs this latest inflation cycle may have already run its course, and even more signs that the economy is not suffering as much as some have feared due to rising prices.

Inflation is rising, but is it also ending? Quite possibly, it is. At the very least, the risk of a stagflation crisis has diminished.

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Headline Inflation Continues To Rise Faster Than Core

At 4.1% year on year, there is no denying that the PCE report shows inflation continuing to heat up in the US economy.

Yet it is also important to note that core inflation—consumer price inflation with food and energy prices stripped out—continued to increase at a significantly slower pace.

Even month on month, headline inflation is rising much faster than core inflation.

Not only is headline inflation outpacing core inflation, but the margin of increase has been greater over the past three months than at any time since the start of President Trump’s second term of office.

What is frequently overlooked in most media reporting on inflation is that core inflation has been moving steadily higher since last fall, while headline inflation’s recent rise is catalyzed mainly by energy prices.

That core inflation’s rise began last fall is particularly relevant given the obvious inflation impact of the oil supply shock which began in March, when Iran illegally closed off the Strait of Hormuz. While that oil supply shock presents significant risk of stagflation for most of the world’s economies, that risk has thus far largely not materialized in the US economy. The US is seeing primarily energy prices rise from the supply shock, but is not seeing significant contagion effect, where energy price inflation catalyzes additional price increases for other goods and services.

Corporate Media Obsessed With Interest Rates

The lack of a significant stagflation crisis in the US thus far has been almost entirely overlooked by corporate media. Instead, corporate media’s concerns about rising inflation have been revolving primarily around whether or not an increase in consumer price inflation will push the Federal Reserve to raise the federal funds rate. Even before the May inflation print came out, the main concern regarding the report was how it would be received by the Federal Reserve.

The monthly PCE report is the Federal Reserve’s preferred inflation gauge. New Fed Chairman Kevin Warsh has said the central bank is committed to bringing inflation back to its 2% target — a level it has failed to reach for the past five years. Wall Street now anticipates the Fed will raise its key interest rate at least once by year’s end in a bid to counteract the stronger price growth.

By making it more expensive to borrow money, the Fed slows overall economic activity and, with it, the pace of price increases.

“Thursday’s PCE is set to take on greater importance for markets, especially since Federal Reserve Chair Warsh was emphatic in last week’s meeting about the central bank’s desire to achieve price stability, and this PCE reading could affect the market’s rate hike expectations,” Rick Gardner, chief investment officer at North Carolina-based RGA Investments, said in a statement.

Corporate media reporting after the report was released kept focusing on a narrative of rising inflation means the Fed will likely raise interest rates later this year.

The report comes a little more than a week after the Fed and new Chairman Kevin Warsh delivered what markets widely viewed as a tough talk on rates and inflation.

Warsh in particular stressed the importance of price stability, with the Federal Open Market Committee adopting language in its post-meeting statement unequivocally stating that it would “deliver price stability” after missing its 2% inflation target for five years running. In addition, officials took off a previously indicated rate cut this year and indicated a likelihood of a hike.

Axios even regarded the US economy’s seeming resilience in the face of rising inflation as a negative, lamenting how consumers were not “cracking”, but were continuing to spend and consume despite rising prices.

Inflation is bad, we are told, not because of its impact on the prices consumers must pay for goods and services, but because of what it “forces” the Federal Reserve to do with respect to the federal funds rate. What the reporting never gets around to acknowledging is that the Fed is never obligated to raise or reduce the federal funds rate.

Perversely corporate media’s focus on the inflation reports potential impact on future Fed interest rate decisions highlights the importance of newly-minted Federal Reserve Chairman Kevin Warsh’ decision to curtail most of the Fed’s “forward guidance” following the latest Federal Open Market Committee decision to stand pat on the federal funds rate. Instead of examining how the economy is responding to rising prices, corporate media—and, presumably, Wall Street overall—is keeping one eye on the Federal Reserve, looking to the Fed for guidance on what the response “should be”.

If people harbored any lingering doubts that the Federal Reserve is exerting too much influence over financial decision-making in the broader US economy, how the media covers the official inflation reports does much to put those doubts to rest.

Energy Price Inflation Largely Unchanged

While energy price inflation remained the dominant component within overall consumer price inflation, month on month energy price inflation itself did not change much.

Oil supply disruptions from the Strait’s closure are continuing to exert pressure on energy prices in the US, but that pressure did not increase significantly in May.

If anything, it is remarkable that energy price inflation did not come down in May, given the decrease in gasoline and diesel prices throughout the month.

The persistence of energy price inflation in May is even more remarkable considering the decline in benchmark crude prices.

That energy price inflation apparently has not fully captured all of the price decreases in May suggests that energy price inflation may be about to come down, particularly month on month.

Without continued energy price inflation, headline inflation cannot continue to rise at its current pace.

Food price inflation, the other inflation component outside of core inflation, certainly is not likely to push the headline index up the way energy prices have. After a significant month on month surge in April, food price inflation cooled way down in May.

While food price inflation had been rising since mid-2024, since last summer it has broadly stabilized.

Food prices are stripped out of core inflation calculations largely because of their greater volatility, just as with energy prices. Yet the fact that we are not seeing a dramatic inflation surge in food prices from the oil supply shock is the strongest signal we have that energy price inflation is not pushing up other prices, at least not yet.

For all the reporting of inflation heating up, the reality of May’s inflation report is that energy price inflation did not really change, and food price inflation actually fell.

Has the current inflation cycle already reached its peak? Food and energy prices suggest it may have.

Durable Goods In Deflation For May

A further signal that inflation may have already peaked comes from durable and non-durable goods prices in May.

Durable goods prices actually fell in May, and non-durable goods showed price disinflation, despite the continued pressure from energy prices. Service price inflation rose month on month, but is still below its recent January 2026 peak.

That non-durable goods inflation eased in May suggests that, outside of energy prices, non-durable goods might very well have been in deflation for May as well. Certainly when energy price inflation is put next to non-durable goods inflation, we can see that energy prices are the dominant factor in non-durable goods inflation.

Just as with the earlier CPI report, the PCE report is showing considerable energy price inflation, but not much additional inflation.

If energy price inflation eases next month or the month after, there is simply not much inflation in other areas to sustain the current headline inflation rates. If energy price inflation tips back into outright deflation, as it did for most of 2023 through mid-2025, headline inflation will ease dramatically.

AI: The One Contrarian Signal

If we look at just the broad pricing data, we could easily conclude that this latest inflation cycle has already reached its peak and that, barring a major change such as renewed hostilities with Iran, consumer price inflation is poised to cool significantly. We would be remiss not to acknowledge that could very easily prove to be the case.

Yet we should note that energy is not the only source of inflationary pressure in the US economy. One area that is exerting increasing pressure is computer technology.

With events in the Middle East dominating headlines worldwide, little attention was given last week to outgoing Apple Computer CEO Tim Cook’s warning that the tech giant was about to raise prices across the board.

“Unfortunately, price increases are unavoidable,” he said. “We’re doing our best to mitigate the huge increases that are being passed to us, and we’ve been trying to shield our customers from the increases, but the situation has become unsustainable.”

Yesterday, the warning became reality, when Apple announced price hikes across a broad range of products, citing pricing pressures from surging memory and chip prices.

“We have never seen a component price increase this much, this quickly,” Apple ​said in a statement. “We have shielded our customers from these increases so far, but we have now reached a point where we need to begin ⁠raising prices on a number of products, including today’s increases for iPad and Mac.”

Apple hiked the price of MacBook Air with 512 gigabytes of storage rose to $1,299 from $1,099, while the MacBook ​Pro with 1 terabyte of storage rose to $1,999 from $1,699, according to updated prices on its website. The iPad Air with 128 gigabytes of storage rose from $599 to $749, among other changes.

Prices for computer hardware had been on the decline for years up until last year, when prices rebounded during the spring before easing back down later in the year.

Since January, hardware prices have repeated their early-2025 surge. Whether they will ease back down in the fall remains as yet unknown.

Driving much of the surge in hardware prices is the runaway interest in artificial intelligence, along with the building of data centers to meet that growing demand. As one would expect, the surge in computer hardware demand is producing a surge in prices.

With so much demand, prices are rising for many of the things that go into the AI build-out. And because those things are used for more than just AI, those price increases are spilling over into the broader economy.

Memory and storage chips, for example, are used in a broad array of consumer-electronics products that includes everything from videogame consoles to cars. Nintendo, Microsoft and Sony have all raised prices on devices. Higher price tags are coming to Apple products, too, according to Chief Executive Tim Cook, who told The Wall Street Journal that the jump in costs was unlike anything he had seen “in any area in over 40 years.”

According to Tim Cook and Apple, there is already contagion effect at work with chip and memory prices pushing up Apple prices.

Will AI fuel a renewed hyperinflation cycle? That is extremely unlikely. While data center buildouts can and will have impacts on local economies, the surge in component and overall tech prices has not resulted in a sustained inflation pressure across the broader economy. Despite a price surge in tech prices that is now months old, durable goods still went into deflation for May, while non-durable goods showed notable price disinflation.

At the same time, we must recall that core price inflation was trending higher long before Operation Epic Fury and the closure of the Strait of Hormuz. There are clearly inflation pressures at work on the US economy besides energy.

Is Artificial Intelligence one of these inflation pressures? If we take Tim Cook’s warning last week seriously, yes, it is. Against a rising number of inflation signals suggesting inflation is close to being done heating up, computer tech prices stand out as a notable contrarian signal.

Is Stagflation Still Possible?

When Iran first closed the Strait of Hormuz, I noted that, given the softness that had been the prevailing trend in US labor markets, stagflation from the oil shock from the Strait’s closure was a real possibility. Given the “fugly” jobs report we had in February, a stagflation crisis was a very real risk for the US economy at that time.

Since that time, we have had three months of good jobs numbers, including back-to-back revisions to the upside. The soft jobs markets of February have morphed into robust and recovering job markets for May.

With stronger job markets and softer core inflation, at present the risks of a 1970s-style stagflation crisis in the US are greatly diminished. The risks here in the US are apparently less than in the EU, given the European Central Bank’s recent decision to raise interest rates, in contrast to the Fed’s decision to stand pat on interest rates.

That does not mean the risks are non-existent. Some of the members of the Federal Open Market Committee have indicated the Fed may raise the federal funds rate at least once during the remainder of the year.

If American jobs markets soften again, the potential for stagflation will return.

If consumer price inflation surges such as it did in March, the potential for stagflation will return.

If both happen at the same time, the potential for stagflation not only returns, but moves from a possibility to a probability.

At present, jobs markets are not softening and inflation is not surging, but if the last few months are testament to anything it is the capacity of even broad economic metrics to shift dramatically from one month to the next.

Stagflation is still very possible, but unless there is a significant shift in either jobs or prices for June, stagflation is for now not very probable.

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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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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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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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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.