Sticky Wage Growth and Shaky Labor Market Raise Stagflation Worries
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Wage growth remains high at 4.1% year-over-year, undermining calls for rate cuts and suggesting a risk of stagflation.
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The unemployment rate remains steady at 3.7%, but there are concerns the labor market may not be as healthy as it appears.
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The number of people not in the labor force has risen, indicating a potential threat of higher unemployment ahead.
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Sticky inflation coupled with rising unemployment raises the specter of 1970s-style stagflation.
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The data suggests the Fed may have to hold rates higher than desired, leading to a steeper yield curve while markets reprices rate risk.