#phillips-curve

#phillips-curve

The geopolitical backdrop in the Middle East remained tense after renewed threats to Iranian infrastructure from President Donald Trump, although reports of a potential deal could limit the demand for the dollar.

"It's a brutal job market. To see that 3.1% hiring rate, the lowest since April 2020, underscores how little hiring is going on."

The figures show the severe impact the Iran war is already having on the euro zone economy. But, like in the 1970s, stagflation could become a widespread global phenomenon characterised by high inflation, low growth, and high unemployment, heavily driven by oil price shocks.

Sanjay Raja, the chief UK economist at Deutsche Bank, stated, 'The UK's disinflation story is set for another twist. The good news is that the CPI is expected to fall in the coming months. The bad news? Higher energy prices appear likely to significantly raise the CPI during the summer, creating yet another spike in the inflation trajectory.'

Weak performance in several service sectors offset gains in retail and wholesale trade, reinforcing concerns about the pace of economic recovery. Japan relies heavily on oil imports from the Middle East, making it particularly sensitive to disruptions in the region.

It's the folks who are entering the job market for the first time that are bearing the brunt of that, and to me, that's in a very standard, classic textbook way, exactly the type of unemployment that the Central Bank is equipped to help accommodate with looser monetary policy.

Typical of Trump, he is boasting about the performance of the U.S. economy in the most hyperbolic terms. He even declared that his economy is 'the greatest ever in history' in a recent interview on Fox Business Network. He points to the stock market and allegedly low inflation to back his claim.

In a note on Saturday, he recalled economist Robert Solow's quip from the 1980s as PCs were transforming the economy: "You can see the computer age everywhere but in the productivity statistics." The same thing can be said today about AI, Slok wrote, noting that data on employment, productivity and inflation are still not showing signs of the new technology.

Economist Claudia Sahm is an expert (if not the expert) on the conditions that presage a recession and how policymakers should react as a result. She is the creator of "the Sahm Rule," an employment indicator monitored by everyone from central banks to the global financial giants. The Sahm Rule says that a recession is likely when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more, relative to the minimum of the three-month averages from the previous year.