US UNEMPLOYMENT JUST HIT A 4-YEAR HIGH
This is a nightmare scenario for the Fed.
Unemployment: 4.6%
Expected: 4.5%
Highest level since September 2021
This data confirms something important:
The US labor market is now weaker than at any point in the last four years.
• Hiring is slowing
• Growth is losing momentum
• Cracks are forming fast
Now here’s the real problem
Inflation is still ~3%, well above the Fed’s 2% target.
That’s the Fed’s worst possible setup:
Slowing growth + rising unemployment + sticky inflation = stagflation
And stagflation leaves no good choices.
The Fed’s dilemma:
Don’t cut rates → recession risk explodes
Cut rates too early → inflation reaccelerates
We’ve seen both mistakes before:
2020: Aggressive cuts → inflation surge
2022: Emergency hikes + QT to clean it up
Now the Fed is stuck between those two errors.
This is why today’s unemployment data matters so much.
The Fed was widely expected not to cut in January —
this unemployment spike puts that plan under serious pressure.
Ignore the data → recession risk
React too fast → inflation wave 2.0
Historical warning
In the 1970s, the US faced a similar setup:
Rising inflation
Rising unemployment
Stagnant growth
The Fed crushed inflation with extreme hikes, but the cost was brutal: S&P 500 returned ~0% from 1970–1980
Today isn’t that extreme,but the risk is real.
What happens next?
If the Fed prioritizes jobs → short,term rally, long-term crash
If the Fed prioritizes inflation → short-term crash, long-term rally
I don’t expect a 1970s-style response.
More easing is likely in 2026
And what follows after that… will be obvious.
The macro clock is ticking.