A stronger stagflationary wind is blowing through the global economy as oil prices surge past $100 a barrel. The latest US employment data on Friday provided evidence — albeit mixed — of a weakening labour market just as the Iran conflict sparks concerns about a price shock from rising energy prices and disrupted supply chains.
The US economy shed 92,000 jobs in February as the unemployment rate climbed to 4.4 per cent. This followed a big “beat” a month earlier, which, as I feared, proved an anomaly. After a 2025 marked by the weakest average monthly job increases outside a recession in more than two decades, the employment landscape remains challenging.
It’s not just about the labour market. Inflation was also flashing cautionary signals before the start of the US-Israel attacks on Iran. Data released earlier showed the personal consumption expenditures price index — the Federal Reserve’s preferred measure of inflation — rose to 2.9 per cent in December, its highest level since March 2024. Meanwhile, core producer price inflation, a measure of input prices, rose to 3.6 per cent, well above the consensus forecast.