Wait… wait… wait… take 2 minutes and read this carefully.
Unemployment in the US is now at its highest level in 4 years.
That’s bad news for the Federal Reserve (Fed).
The unemployment rate came in at 4.6%, slightly higher than expected, and the highest since September 2021.
This shows the US job market is getting weaker. Economic growth is slowing down.
At the same time, inflation is still around 3%, which is higher than the Fed’s goal of 2%.
This is the Fed’s worst situation.
The economy is slowing, but prices are still high. This situation is called stagflation.
And stagflation gives the Fed no good options.
If the Fed doesn’t cut interest rates, the chance of a recession increases. High rates + weak jobs usually mean more people lose work.
If the Fed cuts rates too fast, inflation could rise again.
We’ve seen this before. In 2020, the Fed cut rates quickly. In 2021, inflation exploded. Then in 2022, the Fed had to raise rates aggressively to control it.
Now the Fed is stuck between two past mistakes.
That’s why this unemployment data is so important.
The Fed planned not to cut rates in January. But this rise in unemployment puts pressure on that plan.
Ignore the data → risk a recession
React too fast → risk another inflation surge
There’s also a warning from history.
In the 1970s, the US had rising inflation, rising unemployment, and no growth. The Fed raised rates close to 20% to kill inflation. It worked but the stock market went nowhere for 10 years.
Today’s risk isn’t that extreme, but it’s still serious.
The Fed must fight inflation carefully. If they focus only on inflation, markets could crash first, then rally later.
I don’t think the Fed will repeat the 1970s. More easing is likely around 2026.
What happens after that should be obvious.
