Stagflation --II?

 Financial FAQs

“The Producer Price Index for final demand increased 0.5 percent in January. Prices for final demand services advanced 0.8 percent, and the index for final demand goods declined 0.3 percent. On an unadjusted basis, the index for final demand rose 2.9 percent for the 12 months ended in January.” BLS.gov

FREDbls

Why shouldn’t President Trump’s new Gulf War repeat the 1970’s Arab Oil Embargo (OPEC) stagflation—slowing economic growth + higher inflation—that caused several recessions and resulted in the double-digit inflation of the era?

Iran has said it is closing the Gulf of Hormuz. It has been producing three million barrels of oil daily, has 24 percent of Middle East oil reserves and 12 percent of world reserves, and 30 percent of the world’s oil supply goes through the Gulf, according to the U.S. Energy Information Administration.

Though oil is not as important and energy source now as it was then, says Paul Krugman in Substack, it will still cause higher energy prices—maybe 10 percent higher or more, according to the experts—and oil and gas prices are still a major factor in the inflation equation.

The Producer Price Index measures wholesale prices for products and services that go into finished products have been rising throughout last year. So it is the first place economists look to see the direction of inflation.

Wholesale inflation is surging in large part because it measures the import prices of the raw materials, such as auto parts, that have been boosted by Trump’s tariffs.

Defense Department Secretary Hegseth was quick to say in the first press conference that the Iran war wouldn’t be a repeat of the Iraq war that would mire US in another long war.

But the 1970’s era of stagflation was caused by more than scarce oil. Labor unions were stronger then and could lobby for higher wages to pay for the higher prices, which in turn kept inflation rising in a wage-price spiral until it reached an eye-watering 14 percent

And we have a similar labor problem today. Workers can lobby for higher wages today because there are fewer of them in the workforce. Trump is deporting many of the undocumented workers that work in construction and agriculture, and many of the rest of the estimated 11 million are hiding rather than going to work. Also AI, CHAT GBT, and the like are causing more layoffs at major employers such as Amazon, for starters, further shrinking our workforce.

The irony is that the massive investments in building out the AI energy centers is already making electricity more expensive as well as putting more white-collar employees out of work.

This means fewer consumers are shopping when 70 percent of GDP growth is generated by American consumers! So, I see slowing economic growth as well.

A declining workforce pushing for higher wages that faces higher oil, gas and electricity prices will put more pressure on inflation, and could lead to the classic wage-price spiral that was the ultimate cause of 1970’s stagflation. This is while Trump is saying the Iran war could last just weeks?

The DOW Index has plunged more than -1100 points at this writing on fears the war will spread throughout the Middle East and beyond.

So, our stock market’s behavior will probably determine how long our TACO President will want to prolong this war.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Inflation Is Contagious

 Popular Economics Weekly

“From the preceding month, the PCE price index for December increased 0.4 percent. Excluding food and energy, the PCE price index also increased 0.4 percent.

From the same month one year ago, the PCE price index for December increased 2.9 percent. Excluding food and energy, the PCE price index increased 3.0 percent from one year ago.” BEA.gov

FREDpceindex

The inflation contagion is preceding unabated, per the FRED graph of the Personal Consumption Expenditure Index, the favored Federal Reserve inflation indicator.

Why? Because little to nothing has been done about inflation, although that may change with the Supreme Court’s decision to outlaw Trump’s executive orders allowing retaliatory tariffs. The evidence is that tariffs have raised prices and done nothing to lower the trade deficit that Trump has railed about, per Paul Krugman’s Substack blog.

Paul Krugman

The Fed uses the PCE index because it most broadly measures the change in goods and services prices of goods consumed “by all households, and nonprofit institutions serving households”, says the Bureau of Labor Statistics (BLS).

It is a virus-like contagion indicator because consumers can’t do much about it over the short term other than shop for more bargains. It’s caused by product shortages and Trump’s tariffs, disruptions due to Trump’s continuous changes to tariffs that percolate through the general economy.

The FRED above graph also shows that President Biden had already brought PCE inflation down to 3% in October 2023. It has remained there ever since, only beginning to creep up after Trump’s April 2025 Liberation Day tariff announcements.

And it continues its creep, which will make the Fed’s decision about when to lower interest rates more difficult. Consumers are also becoming increasingly anxious about inflation.

And minutes of the Federal Reserve’s first meeting of the new year showed that several officials wanted the central bank to report there was a chance its next move might be to raise interest rates because of the stubborn inflation data.

The Conference Board’s Confidence Index also measures such attitudes: “Consumers’ write-in responses on factors affecting the economy continued to skew towards pessimism. Comments about prices, inflation, and the cost of goods remained at the top of consumer’s minds.”

Why is inflation so contagious, to use the virus analogy? Because price changes are connected, they ‘infect’ each other as every consumer and business knows. For instance a rise in import prices raises the price of the final product, whatever it is.

Economists call the phenomenon inflation expectations. Research has shown if businesses expect high inflation, they may raise prices immediately; if workers expect it, they will demand higher wages, creating a self-fulfilling prophecy.

It’s all about attempting to predict future behavior, in other words. Consumer confidence surveys, such as the Conference Board’s Consumer Confidence Index attempt to measure inflation expectations, for instance:

“Consumers’ average and median 12-month inflation expectations were little changed but remained elevated. Consumers also believed that interest rates will persist at higher levels over the next 12 months.

The good news is that even Independent voters are seeing through the propaganda and blatant lies that lay behind President Trump’s “Day One” promises.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Is U.S. Growth Slowing?

 Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 1.4 percent in the fourth quarter of 2025 (October, November, and December), according to the advance estimate released today by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 4.4 percent.” BEA.gov

 

BEAgdp

The economic chaos that President Trump has sown by using the tariffs as a tool to coerce trading partners is a major cause of the sudden drop in fourth quarter (Q4) GDP growth from Q2 and Q3 growth (see graph).

So it’s great news the Supreme Court ruling that most of President Trump’s tariffs by executive order are illegal. It will create more certainty over the instability that has bedeviled consumers and businesses alike, which encourages future economic growth.

It’s also a huge victory for the rule of law over a president who routinely disobeys the law since only congress has the power to tax.

Businesses had rushed to counter the chaos created by the tariffs by stockpiling imports before Trump announced more tariffs. And import costs are subtracted from export prices to calculate GDP (Because imported goods aren’t produced domestically.), So higher imports, when all else is equal, tends to slow GDP growth, which measures what is produced domestically.

The furlough of hundreds of thousands of workers without pay during the 43-day government shutdown also slowed consumer spending that had already been affected by the tariff uncertainty.

So we are now beginning to see the damage Trump’s imagined cure for our trade deficits has done. He said other countries should have to eat the higher import costs from the tariffs but they passed on most of the higher costs.

Rump’s tariffs didn’t correct the trade imbalance between imports and exports either because importers then found ways to time their purchases between price swings and/or transfer their business to other countries that had lower tariffs.

In fact, the trade deficit—created by the amount imports exceeded exports— barely changed after all Trump’s planned chaos. It was $901 billion in 2025 vs. $903 billion in 2024.

“Had Congress intended to convey the distinct and extraordinary power to impose tariffs, it would have done so expressly, as it consistently has in other tariff statutes,” said the Supreme Court opinion, which was supported by a 6-3 majority of the court. Justices Samuel Alito, Brett Kavanaugh and Clarence Thomas dissented.

In other words, President Trump can no longer govern by creating the chaos and uncertainty that has enabled him to accumulate so much power and wealth. So maybe “The times they are a changin?”

And sowing economic chaos by being unpredictable doesn’t work as a negotiating tactic either. Companies usually waited until Trump’s TACO bluster caused him to back down before agreeing to a rate. And SCOTUS ruled he now must do the research required by other laws to justify the tariffs.

Trump’s tariffs did not decrease the flow of imports or boost domestic manufacturing, as intended. Domestic manufacturing lost another 80,000 jobs last year, in large part because of the higher steel and aluminum prices that go into so much manufacturing output.

And the mostly illegal tariffs worsened inflation as well. A New York Fed bank study found U.S. businesses and consumers have paid most of the costs of the price increases on imported goods.

“Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers” per the NY Federal Reserve.

The harm done by Trump’s tariffs by fiat makes a long list. China had stopped buying agricultural products as in Trump’s first term and higher tariffs have cost Ford and GM $billions in lost profits.

The Supreme Court ruling exposed the harm ignoring laws and our constitution has done to economic growth. Trump’s Republicans are no longer the party that stands for lower taxes, except among their wealthiest supporters. So much for increasing affordability!

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Republican Party's Bully Capitalism

 Popular Economics Weekly

“Twice as many Americans believe their financial security is getting worse than better, according to an exclusive new poll conducted for the Guardian, and they are increasingly blaming the White House.” The Guardian

Graph: Last Tech Age

President Trump gave himself “A plus plus-plus-plus-plus-plus” grade on the U.S. economy in a recent interview with Politico cited by The Guardian. That Trump can perpetuate such an obvious lie that contradicts what most Americans feel is an example of bully capitalism at large, my term for what economists have termed is ‘late-stage’ capitalism that has been adopted by the Republican Party, a phase of capitalism marked by extreme wealth inequality and corporate dominance in nearly all aspects of life.

Historian Heather Cox Richardson in her Substack blog Letters From an American states that such corporate dominance is the result of at least $50 trillion in income and assets that has been transferred from the bottom 90% to the top 1% of Americans between 1975 and 2020.

It was done via a succession of Republican administration tax cuts and recessions that grew U.S. federal debt to its current record $39 trillion.

Americans now have the worst income inequality in the developed world as measured by various sources, especially the CIA’s World Factbook. In fact, our income inequality is at the level of developing countries like Mozambique.

The recent Guardian/Harris poll makes clear Trump’s big lie attempts to deny what has really happened since the 1970s that most Americans are seeing with their own eyes.

Democrats are almost twice as likely as Republicans to say their financial security is getting worse – 52% versus 27%. Add in 54 percent of Independents believe the same, who are usually the swing voters that determine elections, said the poll.

And 69 percent of Democrats and 58 percent of Independents believe we are already in a recession.

Why when the stock indexes are at record highs? One hint is that bully capitalism has hit women particularly hard. Nearly two-thirds of women (62%) believe the U.S. is in a recession, +12% from February, says the Harris poll, and women, the primary caretakers of children, are the first to see their suffering from the cuts in social welfare benefits such as SNAP and childcare programs by Republicans.

Trump and Republicans have boosted bully capitalism to a new high by showing their blatant lawlessness and cruelty, such as the ICE agents shooting citizens and non-citizens alike. The good news is that Americans can now see with their own eyes the blatant disregard for human suffering, and it has begun to sway the American public in recent elections.

The biggest lie of all perpetuated by Republicans is that “Government is the problem”, that bully capitalism made things better for everyone. No, the American government was formed to protect all Americans, not just the privileged few.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Will Republicans Ever Learn?

 Financial FAQs

“The stakes are enormous if Republicans succeed in removing most of the estimated 11 million undocumented worker (only half of which are from Mexico and the Latin countries), and cut legal immigration in half, as they have promised to do. Economic growth will plummet, since it is mainly based on growth of the working age population, as well as labor productivity, which has also fallen since 2000.” Huffington Post

PEWResearch

Will Republicans ever learn that immigrants have always been the life blood of our economy?

The above quote is from a Huffington Post blog I wrote in 2017, the last time Trump Republicans tried to deport most or all of the 11 million undocumented immigrants.

Nobel economist Paul Krugman has said in a recent Substack blog that the latest unemployment report showed that since January 2025 the economy is estimated to have added 359,000 jobs, down almost 900,000 from job growth the previous year. This indicates that the job market is very close to complete stagnation.

And that means the whole economy could soon be in stagflation that economists have been so worried about—because inflation is still high despite slowing job growth.

Has anything changed in his second term? Yes, President Trump has doubled down on the deportation raids, which has so decimated the jobs market that it is in danger of destroying economic growth for most Americans as well.

Trump is using the lie that undocumented immigrants take jobs away from native-born Americans in ramping up the DHS/ICE assault against almost any immigrant of color, when in fact immigrants not only create more paying jobs, but more consumers that pay taxes as well.

And Trump knows he is lying. His White Christian nationalist-centered policies are tailored to capture most of the economic growth for his oligarchs who hope the $billions they are investing in AI will require fewer human beings. AI and robots don’t pay taxes or go shopping as do the workers that are being replaced.

Barron’s economist Megan Leonhardt highlighted this fact recently, citing the economic planning firm Implan that calculated reducing the immigration population by one million in 2025 reduced GDP by $103.9 billion and eliminated 741,500 potential jobs as compared to 2024 during President Biden’s last year.

“In January 2025, 53.3 million immigrants lived in the United States – the largest number ever recorded. In the ensuing months, however, more immigrants left the country or were deported than arrived. By June, the country’s foreign-born population had shrunk by more than a million people, marking its first decline since the 1960s,” said PEW.

The long-term historical average one-million immigrants per year entering the U.S. have been needed just to keep economic growth at its long-term annual 2 percent real GDP average. And Trump’s State Department has now stopped processing entry visas entirely from 75 countries.

Although the number of adults in the prime working ages of 25 to 64 – 173.2 million in 2015 – will rise to 183.2 million in 2035, according to Pew Research Center projections, the total growth of 10 million over two decades will be lower than the total in any single decade since the Baby Boomers began pouring into the workforce in the 1960s.

What will happen to them? AI means replacing humans with robots that don’t contribute to our retirement systems as well. A country needs to increase its workforce just to finance the retirement benefits for fast-aging population. It’s a truth Republicans have never learned as they continue to support an autocrat who places little value on human lives or the constitution.

And where is most of the economic damage to date? To the farm belt as well as cities in the blue states. Implans reports California, New York, and Texas are most affected, with California having already lost $13.4 billion in GDP and 86,650 fewer jobs. But job losses are occurring in the red states as well. 

Will Republicans ever learn? Immigrants have always been the new blood entering our workforce that has enabled the American economy to grow and renew itself.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

A Better Unemployment Report?

 Financial FAQs

“Total nonfarm payroll employment rose by 130,000 in January, and the unemployment rate changed little at 4.3 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, social assistance, and construction, while federal government and financial activities lost jobs.” BLS

FREDpayrolls

The Whitehouse is touting the January jump in nonfarm payrolls, which it claims is evidence Trump’s economic policies are beginning to work. But that ain’t so by a long shot.

It is not a sign of successful policies when this was the first jump from close to zero new hires in a year per the FRED graph of new payroll jobs.

Annual revisions to last year’s payrolls showed just 181,000 new jobs were created in 2025, down from an earlier estimate of 584,000. That means the monthly average job growth in 2025 was only 15,000.

Whereas the Biden economy added 237,000 jobs in December 2024 alone and 1.495 million in all of 2024. So whose economic policies worked better?

The Biden administration had passed almost $5 trillion in new bipartisan legislation that was modernizing the American economy for the first time in 70 years, passing the Infrastructure, Inflation Reduction and CHIPS Acts as well as increasing electric vehicle puirchase incentives,.

And they had even brought down inflation from the 9 percent high incurred during the COVID-19 pandemic to 3 percent where it has been ever since. But it seems enough Americans believed Trump’s lie that he could bring down inflation on “Day one” when it had already happened.

From Trump’s return to power, however, rather than continue to carry out the bipartisan agreements that would prepare our economy for the next century, his obsession to concentrate as much power unto himself and his Billionaire supporters has led him to destroy as much of those bipartisan agreements as possible that would grow the American economy into the next century.

The result is his return to policies of the last century’s Gilded Age of Robber Barons and corruption has been the opposite of what was promised—rising prices, falling employment and increased pollution.

The higher tariffs are the main reason there was such a loss of jobs last year. Employers couldn’t predict the cost of their imported goods because of Trump’s petty spites and mostly illegal executive actions, so they didn’t expand their businesses and hire additional employees.

And health care is now the main sector hiring new workers, not only because of America’s aging population but because Trump’s policies are making Americans sicker. There have been so many cuts to our healthcare grants and loss of medical experts in the CDC and elsewhere that even measles outbreaks are becoming a problem.

As has been the case for more than a year, health care accounted for more than half of job gains in January, adding 82,000 positions. Construction gained 33,000 jobs, but most other sectors were flat, and the federal government shed another 35,000 positions.

But lastly will be the toll that Trump’s indiscriminate roundup of undocumented immigrants will do to our food supply. I mentioned recently that according to a Michigan State study cited by The Idaho Capital Sun, more than half of surveyed farmers said in 2021 that they were experiencing some sort of worker shortage, It found that when domestic farm employment declines by 10%, food prices of labor-intensive crops increase by around 3%

The number of private payroll jobs will continue to shrink and who really believes that AI, or Chat GDP, or robots can replace real workers anytime in the near future?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Retail Sales Slump

Financial FAQs

“Retail trade sales were virtually unchanged (±0.5 percent)* from November 2025, and up 2.1 percent (±0.5 percent) from last year. Nonstore retailers were up 5.3 percent (±1.4 percent) from last year, while food service and drinking places were up 4.7 percent (±1.8 percent) from December 2024.” Census Bureau

FREDretailsales

This FRED graph shows best what tariffs have done to consumer spending, which powers 70 percent of economic activity, let us not forget. Retail sales fizzled in December as I feared would happen in my November retail report, rising just 2.1 percent annually. And retail sales don’t take inflation into account, so consumers weren’t keeping up with the rising prices.

Sales had declined or were barely positive in six of 11 months through November 2025, I said then. So why wouldn’t consumers turn even more cautious with almost no new payroll jobs. The latest Labor Department JOLTS report showed that as many people were leaving jobs as were hired—so zero net new jobs were added to the workforce, in other words.

This means the economy is steadily shrinking for most Americans because of the disastrous and largely ineffectual tariff policies that have increased import taxes, therefore higher inflation, the opposite of Trump’s promise to bring down prices on ‘Day One”.

The FRED graph shows just how consumers timed their purchases with the tariffs. Sales had plunged in May when the April 2 retaliatory tariffs were announced on all 180 countries in the world, some mostly inhabited by birds. Then Trump’s TACO tactics kicked in postponing them for 60 days, then raising them again when countries refused to meet his deadline for deals.

Also, November was the last month consumers splurged for the holidays so annual sales dropped from 3.1 percent to just 2.1 percent in just one month, when annual retail sales usually increase from 3-6 percent in good times.

My guess is that the AI build out of new energy centers won’t help inflation for a long time, if ever, or create many jobs in the near future, So Trump is saying we must lower interest rates to boost some growth and keep consumers happy. But inflation may not behave since concentrating so much wealth in AI investment with little return to show for it in the near term, may raise inflation.

Or, what will consumers ultimately do if Trump can’t stop playing the tariff game in his attempt to twist arms to achieve his ultimate goal of dominating friends and neighbors rather than cooperating with them?

The Trumper bet is that this year will bring more consumer benefits with the Fed’s new Chairman in May wanting to push interest rates lower as well as the tax breaks in Repub’s Big Beautiful Tax Bill.

In Nobel economist Paul Krugman’s words, “So am I saying that the argument that AI justifies rate cuts is dishonest, that AI has become the last refuge of scoundrels? Why yes, I am.”

So what could go wrong?

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen