A soft labor market, persistent inflation, a potential oil crisis—what could go wrong?
The job market is weakening, inflation is still too high, and we’re at serious risk of a once-in-50-years oil shock. This is almost the exact set of conditions that triggered the stagflation of the 1970s, which at the time was America’s worst economic crisis since the Great Depression. At the moment, the economy is still far from that kind of doomsday scenario, but the direction of travel is disquieting. The economy’s warning lights might not yet be flashing red, but they are certainly flashing yellow.
The jobs report released this morning showed that the U.S. labor market lost 92,000 jobs in February, causing the unemployment rate to rise to 4.4 percent. The numbers for the previous two months, which had suggested decent job growth, were also revised downward: January now showed fewer job gains than initially estimated and December showed overall job losses. These new numbers continue the trend of last month’s revisions, which showed that the economy had added just 181,000 jobs in all of 2025, a tenth of the jobs that had been added the year prior. Taken together, the numbers suggest that 2025 appears to have had the most months with negative job growth since 2010—the midst of the Great Recession—and that 2026 is off to a similarly slow start. The Trump administration sometimes claims that weak job numbers are the by-product of deporting undocumented workers, but the native-born unemployment rate has risen by half a percentage point since Trump took office.
The trend shown in the table below doesn’t look good.
